New tax laws are being introduced to prevent multinationals from avoiding tax by shifting profits out of New Zealand. The Taxation (Neutralising Base Erosion and Profit Shifting) Bill will affect multinationals operating in New Zealand and overseas.

The measures will be aimed at addressing:

• Multinationals that use artificially high interest rates on loans from related parties to claim tax deductible expenses
• Arrangements that exploit differences between two or more countries' tax rules to pay less tax
• Artificial arrangements to avoid having a permanent establishment, thus avoiding a taxable presence in New Zealand, and
• Transactions with offshore group members that do not reflect the actual economic activities the multinationals are undertaking in New Zealand and offshore.

The new measures will see New Zealand's tax laws regarding cross-border transactions become more aligned with those in Australia and are generally consistent with OECD recommendations.

If the Bill is passed in its current form, it's expected that many of the proposed changes will come into force to align with the income years beginning on or after 1 July 2018.

There are few surprises in the government's 2018 Budget presented on 17 May, the first from Minister of Finance, the Hon Grant Robertson.

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From 1 April 2018, small businesses with a turnover of less than $5 million a year will not need to be exposed to use-of-money interest when calculating their provisional tax. Tax payments do need to be made in full and on time.

Using the accounting income method (AIM) which is included in approved accounting software such as MYOB and Xero, small businesses will only pay provisional tax when their business makes a profit. If your business makes a loss, you can get your refund immediately rather than waiting until the end of the tax year.

To use AIM, you must opt-in at the beginning of the tax year before your first payment would be due.

To find out more, go to the IRD's website and/or talk with your chartered accountant.

Legislation is showing its teeth

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