As one of the most economically dynamic countries in Oceania, New Zealand is attracting more and more Chinese companies to invest in it with its transparent tax system, complete legal system and high-quality business environment. However, for Chinese companies entering the New Zealand market for the first time, accurately understanding and complying with local corporate tax obligations often becomes a major challenge for companies operating overseas. As a core component of New Zealand’s tax system, the corporate tax system not only involves basic issues such as tax rate application and tax declaration, but also requires enterprises to fully grasp various preferential policies and prevent and control tax risks in cross-border operations. This article will analyze the essence of New Zealand’s corporate tax system from a practical perspective, sort out the specific applications of various tax regulations for readers in a simple and in-depth manner, and help companies ride the wind and waves in the New Zealand market and move forward steadily.

Basic knowledge of New Zealand corporate tax

In the New Zealand tax law system, accurately defining the taxpayer identity of an enterprise is the first step in tax compliance. According to the latest revised “Income Tax Law” in 2024, New Zealand divides corporate tax entities into two categories: resident enterprises and non-resident enterprises. Resident companies refer to companies incorporated in New Zealand, or companies whose actual management is located in New Zealand. Specifically, if an enterprise’s board of directors regularly holds meetings in New Zealand, or major business decisions are made in New Zealand, it is deemed a tax resident enterprise and is required to pay corporate tax in New Zealand on its global income.

For non-resident companies, the New Zealand Inland Revenue Department (IRD) adopts the “permanent establishment” standard for identification. The latest regulations clarify that if a non-resident enterprise has a fixed place of business in New Zealand, including management sites, branches, offices, factories, etc., or has an agent in New Zealand who continues to sign contracts on behalf of the enterprise, it constitutes a permanent establishment. It is particularly worth noting that in 2024, the IRD updated the standards for the identification of permanent establishments in the digital economy, stipulating that if a foreign enterprise continues to carry out business activities in New Zealand through digital platforms and has an annual income of more than NZ$600,000, it will also be deemed to constitute a permanent establishment.

There are also clear procedural requirements for the confirmation of tax status of newly established enterprises. After completing the company registration, the enterprise must apply for an IRD number from the IRD within 30 days. If the shareholders include foreign investors, the tax residency certificate of the overseas investor is also required. Starting from 2024, IRD has simplified the online application process. Enterprises can complete tax registration in one stop through the myIR platform, and the average processing time is shortened to 3 working days.

In terms of the tax year, New Zealand adopts a flexible accounting year system. The standard accounting year runs from April 1 to March 31 of the following year, which is consistent with the New Zealand Government’s fiscal year. Enterprises can choose to adopt this standard year when registering, or they can apply for a special accounting year based on actual business needs. For example, if the parent company of an enterprise adopts a calendar year (January 1 to December 31), the subsidiary can apply to the IRD to adopt the same fiscal year to facilitate unified management of the group.

Applications for special fiscal years need to provide sufficient business justification. The IRD stipulates that companies must demonstrate that there is an actual operational need to adopt a special fiscal year, and not just for tax planning purposes. Application materials should include a detailed business plan, description of equity structure, description of relationships with affiliated enterprises and other documents. The new regulations in 2024 require that companies applying for a special fiscal year also need to provide operating forecasts for the next three years to prove the continuity of the arrangement.

For already operating companies, if they need to change their fiscal year, they need to follow strict procedural requirements. Change applications must be submitted at least two months before the start of the year in which the change is intended, and must state the reasons and impact of the change. The IRD will make an approval decision within 15 working days. A special reminder is that starting from 2024, if a company has changed its fiscal year in the past three years, it will face more stringent review if it applies for a change again. The first change year after approval may be shorter or longer than 12 months, and the company needs to calculate taxable income according to special rules.

Detailed explanation of tax rate system

New Zealand’s corporate tax rate system is known for its stability and has remained stable since the standard tax rate of 28% was established in 2011. According to the latest tax policy in 2024, this base tax rate applies to the vast majority of companies operating in New Zealand, including the global income of resident companies and the income of non-resident companies derived from New Zealand. It is worth noting that this tax rate is at a relatively favorable level among OECD member countries, reflecting the New Zealand government’s policy orientation of encouraging business development.

The determination of taxable income follows the accrual basis principle. The formula for calculating the taxable income of an enterprise is: Taxable income = Total income – Allowable deductions – Preferential tax deductions. According to the requirements of New Zealand’s latest accounting standards (NZ IFRS), revenue recognition needs to meet the conditions for the transfer of control of goods or services. In terms of expense deductions, the 2024 IRD has updated the expense deduction standards, clearly stipulating that expenses must be directly related to the acquisition of taxable income, and corresponding supporting documents must be retained.

The specific calculation of tax payable adopts the progressive segmentation calculation method. First, determine the company’s annual taxable income, then multiply it by the standard tax rate of 28%, and consider various deductible tax amounts (such as prepaid taxes, overseas taxes paid, etc.). Starting in 2024, IRD will launch an online tax calculator. Companies can estimate the tax payable in real time through the myIR platform to improve tax payment accuracy.

In terms of preferential tax policies, New Zealand provides diversified tax incentives for specific companies and industries. For small and medium-sized enterprises (annual turnover does not exceed NZD 5 million), a simplified collection policy will be implemented from fiscal year 2024, allowing the use of cash receipts and payments for income recognition, and enjoying accelerated depreciation and other discounts. Qualified start-up technology companies can apply for a preferential tax rate of up to 15%, but they need to meet the condition that at least 60% of their revenue comes from R&D activities.

Preferential policies for specific industries are mainly concentrated in agriculture, forestry, clean energy and other fields. The new policy in 2024 places special emphasis on support for green industries. Companies engaged in renewable energy development can enjoy a 150% super deduction for equipment investment and a tax credit of up to 20%. Agricultural enterprises can also enjoy similar discounts for their investment in environmental protection facilities. The film and television production industry continues to implement a rebate policy of up to 40% of production costs, but the application threshold is raised to NZ$1 million.

Regional tax incentives are mainly targeted at key economic development areas designated by the New Zealand government. For example, companies investing in specific development zones in South Island can enjoy a preferential tax rate of 22% for the first three years. Manufacturing companies in remote areas of the North Island can also apply for corresponding tax exemptions if they employ more than 50% of their total employees locally. In 2024, a new preferential tax policy for digital economic parks will be added, and technology companies settled in certified parks can enjoy an additional deduction of up to 25% of R&D expenses.

It should be noted that these preferential policies usually require enterprises to apply in advance and obtain IRD approval. Enterprises must submit preferential policy application renewal materials to IRD within two months after the end of each fiscal year to prove that they still meet the relevant conditions. At the same time, enterprises should establish a complete file management system and properly preserve supporting documents for enjoying preferential policies to cope with possible tax audits. Starting from 2024, the IRD will strengthen the supervision of entities enjoying preferential policies. If companies are found to have made false declarations or improperly enjoyed preferential treatment, they will face fines of up to three times the underpaid tax.

Calculation of taxable income

In the income determination process, the New Zealand Taxation Agency adopts the comprehensive income principle. The recognition of operating income must strictly follow the NZ IFRS 15 revenue standard updated in 2024, which stipulates that enterprises should recognize revenue according to the “five-step method”: identify the contract, identify the performance obligations, determine the transaction price, and allocate the transaction price to various performance obligations. , revenue is recognized when the performance obligations are completed. For the sale of goods, the time point for revenue recognition is when control of the goods is transferred; for the provision of services, the percentage of completion method is used or revenue is recognized when the service is completed. The 2024 new regulations particularly emphasize the standards for revenue recognition in the digital economy. For new business formats such as online services and digital product sales, revenue is required to be recognized based on the point in time when the user actually obtains the right to use it.

In terms of investment income treatment, New Zealand adopts differentiated taxation policies for different types of investment income. In terms of dividend income, tax-paid dividends received from New Zealand resident companies can enjoy tax-free treatment, but dividends from overseas must be fully included in taxable income. Interest income is calculated according to the accrual basis principle, and special reporting requirements will be established for interest income obtained through digital financial platforms from 2024. In terms of capital gains, although New Zealand does not have a separate capital gains tax, if the investment behavior has a commercial purpose, the relevant gains will be taxed as business income.

The taxation of foreign income follows the principle of global income, and New Zealand resident companies are required to pay tax in New Zealand on their global income. To avoid double taxation, companies can apply for a credit for income tax paid overseas, but the credit limit shall not exceed the tax payable on the income calculated at New Zealand tax rates. The new policy in 2024 places special emphasis on the collection and management of offshore digital service income, requiring companies to separately account for digital service income from different jurisdictions.

In terms of deduction items, New Zealand adopts the general principle of “relevant to the acquisition of taxable income”. Three basic conditions must be met for cost and expense deductions: the occurrence of the expense is related to the acquisition of taxable income, the expense has actually been incurred or a debt has been borne, and the expense has authentic supporting documents. In 2024, the IRD specifically clarified the deduction standards for telecommuting expenses, allowing companies to deduct reasonable home office subsidies as expenses.

Depreciation and amortization policies adopt two methods: straight-line method and declining balance method. Starting from 2024, in order to encourage enterprises to upgrade their technology, you can choose to apply a temporary accelerated depreciation policy of up to 60% to newly purchased production equipment and environmental protection facilities. The amortization period of intangible assets is determined based on the estimated useful life of the assets. The longest period for patent rights shall not exceed 20 years, and the longest period for trademark rights shall not exceed 10 years. Software development expenditures can be capitalized or directly expensed.

The loss carryforward system is relatively loose. Losses incurred by an enterprise can be carried forward indefinitely, but it must meet the equity continuity test (that is, at least 49% of the equity structure remains unchanged from the year when the loss occurs to the year of use). New regulations will be added in 2024. Companies affected by the new coronavirus epidemic can apply for special loss carryover policies and relax equity continuity requirements.

When dealing with special matters, the pricing of related-party transactions must follow the principle of independent transactions. The transaction price between an enterprise and related parties should be in line with fair market value. The IRD requires enterprises with an annual amount of related party transactions exceeding NZ$10 million to prepare contemporaneous documentation, including master files, local files and country-by-country reports. Starting from 2024, anti-tax avoidance management of related-party transactions will be further strengthened, especially stricter requirements will be put forward for the pricing of cross-border digital services.

The tax treatment principle for asset disposal is: if the acquisition and disposal of assets have a commercial purpose, the disposal proceeds should be included in taxable income; if they are held for investment purposes, they may be exempt from tax. But for real estate, even if it is held for investment, if the holding period is less than 10 years, you still need to pay tax on the disposal gain. In 2024, special emphasis is placed on taxation and management requirements for the disposal of digital assets (such as cryptocurrencies).

In terms of corporate reorganization and mergers and acquisitions, New Zealand tax law allows qualified reorganizations to enjoy deferred tax treatment, but they must meet the business purpose test and equity continuity test. The new regulations in 2024 clarify the special requirements for cross-border reorganization, including the application standards of anti-tax avoidance provisions and information reporting obligations. In particular, reorganizations involving cross-border transfers of intellectual property require independent assessment reports and may trigger special anti-tax avoidance reviews.

Prepayment tax system

New Zealand’s corporate tax prepayment system provides companies with a variety of prepayment options. The standard prepayment method is the most basic prepayment mode and is suitable for enterprises with an annual turnover of less than 1 million New Zealand dollars. The prepayment base for this year is determined based on 105% of the actual tax payable in the previous year. In 2024, IRD updated the standard prepayment rules. In the first tax year, newly established enterprises can determine the prepayment base based on reasonably predicted taxable income, but they need to provide detailed forecast basis and calculation instructions.

The estimated prepayment method is more flexible and is mainly suitable for enterprises with large business scale or large income fluctuations. Enterprises that adopt this method can make a reasonable estimate of the expected annual tax payable based on the actual operating conditions of the year, and determine the prepayment amount accordingly. The new regulations in 2024 require that if estimated prepayment is used, the enterprise must submit detailed estimation basis in the myIR system, including supporting documents such as revenue forecast, cost composition and cash flow forecast. A special reminder is that if the difference between the final actual tax amount and the estimated advance tax amount exceeds 20%, the company may need to bear interest on the difference.

The ratio prepayment method is a new prepayment option in 2024, mainly for service-oriented enterprises with relatively stable operating income. Companies can choose to prepay a certain percentage of monthly turnover (usually between 1.5% and 2.5%), which is determined based on the company’s historical tax data. Enterprises that choose this method need to use IRD-certified accounting software to achieve automated matching of sales data and prepaid tax amounts.

In terms of prepayment schedule, New Zealand adopts an installment prepayment system. Enterprises with a standard fiscal year (April 1 to March 31 of the following year) usually need to complete three prepayments on August 28, January 15, and May 7, and the amount of each prepayment is in principle equal. Starting from 2024, companies with an annual turnover of more than NZ$5 million must adopt a monthly prepayment system and complete the prepayment electronically before the 20th of the following month.

Adjustments to prepaid amounts follow strict rules. If an enterprise discovers major changes in its business conditions during the prepayment period, it can submit an adjustment application at least 30 days before the next prepayment date. The new policy in 2024 stipulates that if operations are seriously damaged due to force majeure factors (such as natural disasters, public health events, etc.), enterprises can apply for temporary adjustment of the prepayment amount or extension of prepayment, but they need to provide sufficient supporting materials.

The IRD has formulated clear procedures for underpayment or overpayment of prepaid taxes. In the case of underpayment, if the final actual tax payable exceeds the total prepaid amount, the enterprise needs to pay the difference before July 7 of the following year, and interest may be charged (the late payment interest rate in 2024 is 7.98%). In particular, if the underpayment is due to deliberate underestimation of taxable income, you may face an underpayment penalty of up to 20%.

Overpayments of tax can be carried forward to the next year or applied for a tax refund. Starting from 2024, IRD has simplified the tax refund process. Enterprises can apply for tax refund through the myIR system, and the review is generally completed within 15 working days. If you choose to carry it forward, the overpaid tax can be used as a credit against the next year’s prepayment obligation. It is worth noting that overpayments of taxes carried forward do not accrue interest, so companies need to choose a reasonable treatment method based on their own cash flow conditions.

In order to help companies better manage prepaid taxes, IRD launched a prepaid tax management tool in 2024. Companies can use this tool to monitor prepayment status in real time, conduct tax planning, and obtain early warning prompts. At the same time, businesses that prepay more than 100,000 New Zealand dollars must use electronic payment methods and no longer accept check payments.

Declaration and Payment Practices

The annual declaration process will be fully electronic in 2024. Businesses must submit their income tax return (IR4) through the myIR platform, and the filing deadline for the standard accounting year is July 7 of the following year. For enterprises that adopt a non-standard fiscal year, the reporting deadline is the 7th day of the fourth month after the end of the fiscal year. Declaration materials include financial statements, tax adjustment forms and related schedules. In 2024, there will be a new requirement to submit a tax risk management report, especially for large enterprises with an annual turnover of more than 30 million New Zealand dollars. The electronic declaration system supports automatic verification functions, which can check the integrity and logic of declaration data in real time.

Temporary declaration regulations are mainly aimed at special business situations. If an enterprise undergoes a major asset reorganization, change of control, or early termination of operations, it must submit a provisional declaration within 45 days after the event occurs. New regulations in 2024 require that if an enterprise plans to conduct cross-border reorganization or large asset disposal, it must submit a temporary declaration plan to the IRD 30 days in advance to obtain pre-review. In addition to regular financial data, temporary declaration materials also need to include transaction plan descriptions, tax impact analysis and other special documents.

The correction filing procedure applies where a filing error is discovered. Enterprises can submit correction declarations within 4 years from the original declaration date. From 2024, correction declarations must be submitted online through the myIR system, with an explanation of the reasons for the correction and relevant supporting materials. If the correction results in an increase in taxes, the company must pay supplementary taxes and corresponding interest at the same time; if it is discovered independently and corrected on its own initiative, it can apply for penalty reduction or exemption. A special reminder is that corrected declarations with major errors (with a tax impact exceeding NZD 100,000) will trigger the IRD’s special review process.

In terms of payment methods, the New Zealand Taxation Office vigorously promotes electronic payment channels. Online payment methods include online bank transfer, credit card payment and direct debit. A new mobile payment function will be added in 2024, and businesses can complete tax payments through the IRD mobile application. To ensure payment security, large-amount payments (over NZD 500,000) need to be scheduled through the myIR system 24 hours in advance. In particular, cash and check payment methods will be completely canceled starting in 2024, and all tax payments must be completed through electronic channels.

The installment payment provisions provide relief for enterprises that temporarily encounter financial difficulties. Enterprises can apply to pay the tax due in installments, with a maximum period of 24 months. The new policy in 2024 stipulates that applying for installment payment needs to meet the following conditions: the company has no major tax violation records in the past three years, provides detailed cash flow forecasts and repayment plans, and provides guarantees if necessary. Enterprises approved for installment payment need to pay installment interest (the interest rate in 2024 is 7.98%), but if they can strictly follow the installment plan, they can apply for partial late payment fee exemption.

Exchange rate conversion rules mainly involve tax calculations for cross-border business. Enterprises can choose to use the exchange rate on the transaction day, the monthly average exchange rate, or the annual standard exchange rate published by the IRD for conversion. New regulations in 2024 require that companies with annual cross-border transaction amounts exceeding NZ$10 million must use the transaction day exchange rate or monthly average exchange rate, and must not use the annual standard exchange rate. Overseas income collected by online cross-border payment platforms should be converted according to the exchange rate on the actual settlement date of the funds. Companies need to clearly specify exchange rate translation methods in their accounting policies and maintain consistency.

In order to improve tax efficiency, IRD will launch a smart tax assistant service in 2024, which can automatically remind people of filing deadlines, payment amounts, and provide personalized tax guidance. At the same time, companies can get real-time answers to common tax-related issues through the online consultation system. It should be noted that even if a tax agency is used to handle declaration and payment, the enterprise as the taxpayer still bears the ultimate responsibility for the accuracy of the declaration data and timely payment of taxes.

Preferential tax policies

Preferential policies for R&D and innovation are an important tool for New Zealand to enhance its industrial competitiveness. In 2024, the super deduction policy for R&D expenditures will be further optimized. Qualified R&D expenses can enjoy a 15% tax credit. Enterprises with annual R&D investment exceeding NZD 1 million can receive an additional 5% credit for the excess amount. The research and development scope has added cutting-edge fields such as artificial intelligence, quantum computing, and clean energy. Special requirements are that R&D projects must be carried out in New Zealand, and the company needs to be certified by the Callaghan Innovation agency for R&D activities. In order to prevent abuse of preferential policies, companies must establish special R&D project ledgers to record in detail R&D personnel, equipment usage, material consumption and other expenditures.

In terms of preferential policies for intellectual property rights, New Zealand will launch a pilot patent box system in 2024. Income generated from patents obtained by enterprises through independent research and development can enjoy a preferential tax rate of 12.5%, which is significantly lower than the general corporate income tax rate of 28%. However, the patent must be registered in New Zealand, and the company must prove that at least 80% of its R&D activities are completed locally. In addition, for the protection of software copyrights and trade secrets, 100% of the protective expenditures invested by enterprises can be deducted before tax, including legal fees and technical protection measures.

The high-tech enterprise certification standards will be updated in 2024. Enterprises need to meet the following conditions: R&D investment accounts for no less than 3% of revenue, possess independent intellectual property rights, have a stable R&D team (at least 5 full-time R&D personnel), and the average annual growth rate of operating income in the past three years exceeds 20%. In addition to enjoying the super deduction for R&D expenditures, certified enterprises can also enjoy supporting policies such as accelerated depreciation and talent introduction subsidies. The certification is valid for three years and needs to be re-applied upon expiration. Enterprises that fail to pass the review will have relevant discounts revoked.

In terms of industrial support policies, New Zealand focuses on supporting strategic emerging industries such as digital economy, biotechnology, and clean energy. In 2024, the “Digital Innovation Plan” will be launched for digital economy enterprises, and investments in cloud computing, big data, blockchain and other fields can enjoy equipment investment credits of up to 200%. Laboratory construction expenditures of biotechnology companies can be deducted in one time before tax, and clean energy projects can enjoy the accelerated depreciation policy of environmental protection equipment (the maximum annual depreciation rate is 60%).

Regional development incentive policies focus on supporting the economic development of less developed areas. A “Regional Development Fund” was established in 2024. Companies investing in designated areas can enjoy income tax reductions for up to five years. Corporate income tax is exempted from the first to the third year, and the tax is halved in the fourth and fifth years. Investment projects need to meet minimum investment amounts (usually no less than NZ$5 million) and job creation (creating at least 20 full-time jobs) requirements. In particular, more favorable conditions may apply to projects invested in indigenous areas.

Preferential policies for foreign investment will undergo major adjustments in 2024. New Zealand welcomes foreign investment into high-tech manufacturing, innovative services and other fields, and qualified foreign-invested enterprises enjoy the same treatment as local enterprises. The new policy particularly emphasizes the importance of technology transfer. If a foreign investment project includes a core technology transfer plan, it can enjoy additional tax benefits, including a 150% deduction for technology introduction costs and accelerated depreciation of related equipment. But at the same time, anti-tax avoidance management has also been strengthened, requiring foreign-invested enterprises to provide detailed business plans and true investment certificates.

In order to ensure the effective implementation of preferential policies, the New Zealand Taxation Office has set up a special policy consultation service window, and companies can obtain written policy confirmation before investing. A “credit points system” will also be introduced in 2024. Companies accumulate credit scores based on indicators such as tax compliance and innovation contribution. High-scoring companies can enjoy convenient measures such as simplified procedures and priority approval. At the same time, a dynamic evaluation mechanism for preferential policies has been established to evaluate the effect of policy implementation every year and adjust preferential measures in a timely manner based on the evaluation results.

Risk Management and Compliance

In terms of tax audit focus, the New Zealand Revenue Department (IRD) will pay special attention to cross-border transactions, transfer pricing, digital economy taxation and other areas in 2024. Large-scale related-party transactions have become key targets for inspection, and companies with annual related-party transactions exceeding 10 million New Zealand dollars will be included in the key monitoring list. Audits in the field of digital economy mainly target e-commerce platforms, cloud service providers and cryptocurrency transactions, focusing on reviewing the timing of revenue recognition and compliance with cross-border payments. In addition, the authenticity of research and development expenditures of high-tech enterprises, the income recognition of real estate development enterprises, and tax avoidance arrangements in corporate restructuring are also the focus of the inspection. IRD uses big data analysis technology to cross-compare enterprise declaration data with third-party information to screen out abnormal cases for key verification.

The violation penalty standards will be adjusted in 2024, adopting a more refined graded penalty mechanism. Minor violations (such as overdue declarations of less than 30 days) are subject to a fine of 1% of the tax payable; major violations (such as intentional underreporting of income) are subject to fines of up to 150% of the tax payable and may face criminal prosecution. It is particularly worth noting that for malicious tax avoidance arrangements, in addition to back taxes and penalties, a monthly late payment fee of 7.98% will also be borne. If you violate the rules for the first time, you can apply for penalty reduction, but you need to provide a detailed rectification plan. Repeat violations will be included in the list of high-risk enterprises and supervision will be strengthened.

The dispute resolution mechanism provides multiple levels of relief channels. If an enterprise has objections to a tax decision, it can lodge an objection within 4 months after receiving the decision. In 2024, a new online objection application channel will be added. If the objection is not resolved, you can apply to the Tax Dispute Arbitration Tribunal for arbitration, and the arbitration fees will be borne by the losing party. If you are not satisfied with the arbitration award, you can file a lawsuit with the High Court, but you need to pay 50% of the disputed tax as a deposit before filing a lawsuit. In order to improve the efficiency of dispute resolution, IRD has established a fast-track processing channel, and simplified procedures can be applied to cases with a dispute amount of less than 100,000 New Zealand dollars.

In terms of internal control system construction, in 2024 IRD issued the “Guidelines for Internal Control of Enterprise Tax Risks”, requiring enterprises to establish a comprehensive tax risk management system. Specifically, this includes establishing dedicated tax risk management positions, formulating risk identification and assessment procedures, and establishing a regular self-examination mechanism. Businesses with an annual turnover of more than NZ$50 million must conduct a tax risk assessment annually and report to the board of directors. The internal control system needs to cover key aspects such as accurate recording of transactions, tax declaration review, and invoice management, and regularly update risk response measures.

File management requirements are more stringent. Enterprises must keep tax-related original vouchers, accounting books, tax declaration materials and other files for 7 years. In 2024, companies will be newly required to establish electronic archives management systems to ensure the authenticity, integrity and traceability of electronic archives. Key tax documents must be kept in both paper and electronic versions and backed up regularly. In particular, archives involving cross-border transactions need to be saved bilingually and meet the storage requirements of both PDF and editable formats.

Invoice management standards will fully implement the electronic invoice system in 2024. All VAT invoices must be issued through an IRD-certified electronic invoice system, and paper invoices are only used as a backup. The electronic invoice system needs to have real-time transmission capabilities to ensure that transaction data is uploaded to the tax system in a timely manner. Invoice issuance, transmission, storage and other aspects must comply with data security standards to prevent information leakage and tampering. Special regulations stipulate that companies with a turnover of more than NZ$2 million for 12 consecutive months must use an enhanced electronic invoice system that supports automatic verification and risk warning functions.

In order to strengthen compliance management, IRD launched the “Tax Compliance Rating System” to conduct comprehensive ratings based on corporate tax credit records, internal control levels, file management and other indicators. High-level enterprises can enjoy convenient measures such as simplified procedures and priority processing; low-level enterprises will face more frequent inspections and stricter supervision. At the same time, IRD regularly releases typical cases and compliance guidelines to help companies improve their risk prevention capabilities. In 2024, the responsibilities of tax intermediaries are particularly emphasized, requiring them to strictly perform due diligence obligations in the process of providing services. When major risks are discovered, they must promptly inform customers and assist in rectification.

Analysis of practical cases

The calculation of manufacturing tax burden takes a precision instrument manufacturing company in New Zealand as an example. The company’s operating income in 2024 is NZ$25 million and it is mainly engaged in the research and development and manufacturing of medical equipment. By rationally applying the super deduction policy for R&D expenditures, its R&D investment of NZD 4 million received a 15% tax credit, saving NZD 600,000 in taxes. At the same time, the purchased intelligent manufacturing equipment is subject to accelerated depreciation policy, and the first-year depreciation rate is increased to 40%, significantly reducing the current taxable income. In addition, the company has set up factories in underdeveloped areas of South Island and enjoys regional development benefits. It is exempt from corporate income tax for the first three years. It is expected that the overall tax rate will be reduced from 28% to about 15%.

Optimization of tax burden in the service industry takes an IT consulting company as a case study. The company will have revenue of NZ$18 million in 2024 and mainly provides software development and technology consulting services. By establishing offshore R&D centers, some non-core development work is transferred to lower-cost areas while ensuring that core technologies and intellectual property remain in New Zealand, which not only reduces operating costs but also maintains the qualification for super deduction of R&D expenditures. The company also established an employee stock ownership plan to convert part of remuneration into equity incentives, which not only improved employee enthusiasm but also achieved reasonable optimization of tax burden. Combined with the preferential treatment for high-tech enterprise certification, the company’s overall tax rate is reduced by approximately 8 percentage points.

The case of tax planning for trading companies selected an import and export trading company. The company’s total import and export volume in 2024 will reach 120 million New Zealand dollars, and it is mainly engaged in the trade of agricultural products. By setting up bonded warehouses, some goods are temporarily stored in the bonded area, and then the import procedures are handled during actual sales, which effectively reduces the cost of capital occupation. At the same time, we make use of the free trade agreements between New Zealand and its major trading partners to rationally arrange the origin of goods and enjoy tariff preferences to the greatest extent. In terms of foreign exchange management, the exchange rate risk is effectively controlled by signing forward foreign exchange contracts to lock in the exchange rate and selecting the optimal exchange rate conversion method.

The tax treatment of loss-making enterprises takes a new energy enterprise as an example. The company is in a technology research and development investment period and will suffer an operating loss of NZ$8 million in 2024. According to the new regulations, losses can be carried forward indefinitely, but the annual deduction amount cannot exceed 50% of the taxable income for that year. By acquiring some R&D equipment through operating leases, the company reduces fixed asset investment expenditures and improves cash flow. At the same time, we use the government’s green energy subsidy policy to obtain operating capital support. It is important to note that companies still need to file tax returns on time during periods of losses and maintain complete accounting records so that losses can be carried forward smoothly when profits are realized in the future.

The mixed business taxation case analyzes a comprehensive enterprise that sells goods and provides services. The company’s merchandise sales revenue in 2024 will be NZ$15 million and service revenue will be NZ$8 million. Different revenue recognition methods apply to different businesses: revenue from product sales is recognized when the goods are delivered, and service revenue is recognized based on the completion progress. By establishing a business segment accounting system, we can accurately classify the attribution of various types of income and costs to ensure the accuracy of tax treatment. For mixed sales items, the applicable tax rate is determined according to the main business type to avoid double taxation or tax evasion.

The case of group enterprise coordination introduces a holding group with multiple subsidiaries. The group will unify the financial accounting and tax management of each subsidiary through the establishment of a shared service center in 2024. The group’s consolidated tax policy is adopted to coordinate the profits and losses of each subsidiary. The taxable income of some profitable companies can be offset against the losses of loss-making companies, thereby optimizing the overall tax burden of the group. At the same time, through unified management of transfer pricing policies, we ensure that related-party transactions comply with the arm’s length principle and reduce tax risks. Special attention should be paid to the need to develop a reasonable fund pricing mechanism for intra-group capital transactions to avoid being identified as a tax avoidance arrangement.

In order to improve the practicality of cases, IRD will establish a case database in 2024 and regularly update typical cases in various industries and interpretations of the latest tax policies. Enterprises can check the handling methods of similar cases through the online platform as a reference for tax decisions. At the same time, IRD also reminds enterprises to pay attention to the timeliness and regional applicability of policies when conducting tax planning, and avoid simply copying cases while ignoring differences in specific circumstances. It is recommended that enterprises conduct feasibility analysis through professional tax consultants before implementing major tax arrangements, and apply for advance ruling from the tax authorities when necessary to ensure compliance.

Policy dynamics tracking

There are a number of important changes in New Zealand’s tax policy in 2024. The first is the corporate income tax reform, which introduces a dual-track tax rate: small and medium-sized enterprises with an annual taxable income of less than NZ$2 million are subject to a 25% tax rate, and the tax rate above that is maintained at 28%. The R&D tax credit rate was increased to 15%, and the scope of application was expanded to include artificial intelligence and green technology research and development. New restrictions have been implemented in the field of real estate investment, canceling the depreciation deduction for residential properties and increasing the stamp duty on residential properties purchased by foreign investors to 15%. In addition, the digital services tax was officially implemented, levying a 3% turnover tax on large multinational digital platforms.

In terms of transition period arrangements, the new tax rate system will be transitioned in two years: in the first phase in 2024, qualified enterprises will be allowed to apply the new tax rate in advance, and in 2025 it will be fully implemented. The new R&D tax credit policy provides a six-month policy adaptation period, during which companies can improve their R&D project management systems. The new real estate policy retains the applicable qualifications of the original policy for transaction contracts signed before March 15, 2024. The digital services tax adopts a step-by-step implementation strategy. Platforms with an annual turnover of more than NZ$20 million will be implemented first, and will be extended to all eligible digital service providers the following year.

Execution caliber instructions are more detailed and clear. Regarding the dual-track tax rate, IRD issued detailed determination criteria, clarifying that affiliated companies need to consolidate their income to prevent tax avoidance due to spin-offs. The standards for identifying R&D expenditures are further refined, with special emphasis on the expenditure aggregation methods for entrusted R&D and collaborative R&D. The new real estate investment rules clarify the specific definition of “residential property”, including apartments, townhouses and other types, but exclude serviced apartments for commercial purposes. There are specific guidelines on the objects to be levied, tax calculation basis, and declaration procedures for digital service tax.

There are three obvious trends in the direction of tax reform. The first is to further simplify the tax system, with plans to consolidate the existing more than 70 tax categories into about 40 in the next three years. The second is to deepen the digital reform of taxation and promote the construction of “smart taxation”. It is expected that more than 95% of tax business will be processed online by 2025. The third is to strengthen the tax regulation function and make more use of tax policies to guide industrial upgrading and sustainable development. Especially in areas such as clean energy and environmental protection, more incentive policies will be launched.

In terms of international tax coordination, New Zealand actively participates in the OECD global minimum tax reform. It is planned to complete domestic legislation by 2025 and implement the world’s lowest corporate tax rate of 15%. At the same time, bilateral tax agreements are being updated with major trading partners, focusing on improving digital economy taxation provisions and anti-tax avoidance provisions. In the area of ​​transfer pricing, more stringent substantive requirements will be adopted, requiring multinational enterprises to provide more detailed value chain analysis and proof of economic substance. It is expected that the automatic exchange of tax information with other countries will be strengthened in the future to combat cross-border tax evasion.

Taxation of the digital economy has become a key area of ​​focus. In addition to the digital services tax that has been implemented, New Zealand is working on a more comprehensive framework for taxing the digital economy. It is planned to introduce special tax regulations for cryptocurrency transactions in 2025 to clarify the tax scope and tax calculation methods of virtual currency transactions. For sharing economy platforms, platform operators will be required to regularly report transaction data to tax authorities to assist in the collection of personal income tax. In the field of e-commerce, it is planned to introduce a real-time tax reporting system, requiring large e-commerce platforms to calculate and prepay taxes on a monthly basis.

To ensure the timeliness and accuracy of policy implementation, IRD has established a policy dynamic tracking system. Enterprises can obtain the latest policy updates through the subscription service, and the system will automatically push policy changes related to the enterprise. At the same time, IRD holds policy interpretation meetings every quarter and invites experts to explain in detail the specific application of new policies. For major policy changes, case guidelines will also be issued to help companies accurately understand and implement them.

It is particularly noteworthy that during policy changes, companies need to pay close attention to changes in transitional arrangements and implementation details. It is recommended that enterprises establish a policy tracking mechanism, regularly evaluate the impact of policy changes on operations, and timely adjust business strategies and tax arrangements when necessary. At the same time, attention should also be paid to identifying opportunities brought by policy changes and rationally utilizing new preferential policies to promote enterprise development. In case of uncertainty, it is recommended to consult with a professional tax consultant or directly with the tax authorities to ensure the accuracy of policy understanding and implementation.