Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
of Information for Tax Purposes
New Zealand
2018 (Second Round)
Global Forum
on Transparency
and Exchange
of Information for Tax
Purposes: New Zealand
2018 (Second Round)
PEER REVIEW REPORT ON THE EXCHANGE
OF INFORMATION ON REQUEST
March 2018
(reflecting the legal and regulatory framework
as at January 2018)
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Series: Global Forum on Transparency and Exchange of Information for Tax Purposes
ISSN 2219-4681 (print)
ISSN 2219-469X (online)
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TABLE OF CONTENTS – 3
Table of contents
Reader’s guide����������������������������������������������������������������������������������������������������������� 5
Executive summary��������������������������������������������������������������������������������������������������11
Reader’s guide
The Financial Action Task Force (FATF) evaluates jurisdictions for com-
pliance with anti-money laundering and combating terrorist financing (AML/
CFT) standards. Its reviews are based on a jurisdiction’s compliance with
40 different technical recommendations and the effectiveness regarding 11
immediate outcomes, which cover a broad array of money-laundering issues.
More information
All reports are published once adopted by the Global Forum. For
more information on the work of the Global Forum on Transparency and
Exchange of Information for Tax Purposes, and for copies of the published
reports, please refer to www.oecd.org/tax/transparency and http://dx.doi.
org/10.1787/2219469x.
General terms
Executive summary
3. The 2011 Report found that New Zealand had a very strong perfor-
mance in exchange of information and very broad powers to obtain all types of
information maintained by any person under its jurisdiction. Recommendations
were made in the 2011 Report only in respect of two essential elements. Under
element A.1, availability of ownership and identity information, New Zealand
received recommendations concerning nominee shareholders and the effective-
ness of enforcement provisions where all directors were non-residents. Under
element A.2, New Zealand was recommended to require that accounting
records and underlying documentation be maintained for liquidated companies
for at least five years. New Zealand has addressed the two recommendations
on element A.1 but is still in the process of addressing the issue identified
in respect of the availability of records for liquidated companies under ele-
ment A.2. The present review finds that while the same issue exists for limited
partnerships, its impact in practice has been limited.
4. Since the 2011 Report, New Zealand continues to perform well in all
aspects of transparency and exchange of information. The organisation and
procedures remain complete and coherent and peers have been very satis-
fied with the quality and timeliness of the information provided under New
Zealand’s EOI mechanisms.
5. Over the new review period, New Zealand received a total of
194 requests from more than ten exchange of information partners. Australia
was substantively New Zealand’s largest partner for EOIR, both inbound
and outbound, due to their close geographical location and economic ties.
However, a number of jurisdictions reported that the requests they sent to
New Zealand were, albeit limited in number, very important in terms of the
amount of tax expected to be assessed. Information requested from New
Zealand included information on tax avoidance schemes, information on
employment, residency status, travel movements, property ownership and
general tax information. While New Zealand does not have an offshore finan-
cial centre, New Zealand non-resident settlor trusts and corporate entities
have been used by foreign residents.
6. In respect of the new aspects of the 2016 ToR, particularly with
respect to the availability of beneficial ownership information, New Zealand
aimed at addressing most offshore tax evasion risks by imposing specific tax
reporting obligations on entities and arrangements that are owned and con-
trolled overseas. This review finds that New Zealand’s legal framework and
practice in relation to beneficial ownership largely meet the standard and a
small gap was identified in terms of coverage of legal entities. New disclosure
requirements were introduced for trusts with non-resident settlors, which
came as a response to tax abuse and anti-money laundering risks identified.
7. The 2016 ToR now evaluates the quality of requests made and in this
regard New Zealand has a comprehensive system to ensure that its requests
meet the requirements of its EOI mechanisms. Peers appreciated the quality
of New Zealand’s requests, the positive working relationship and the feedback
received concerning the use of the information.
Key recommendation(s)
Overall rating
10. New Zealand has achieved a rating of Compliant in relation to all ele-
ments, with the exception of Element A.1, which is rated Largely Compliant.
New Zealand’s overall rating is Compliant based on a global consideration of
New Zealand’s compliance with the individual elements.
11. This report was approved at the PRG meeting on 26 February-1 March
2018 and was adopted by the Global Forum on 30 March 2018. A follow up
report on the steps undertaken by New Zealand to address the recommenda-
tions made in this report should be provided to the PRG no later than 30 June
2019 and thereafter in accordance with the procedure set out under the 2016
Methodology.
12. This overview provides some basic information about New Zealand
that serves as context for understanding the analysis in the main body of the
report. This is not intended to be a comprehensive overview of New Zealand’s
legal, commercial or regulatory systems.
Legal system
from the United Kingdom and other Commonwealth jurisdictions; such case
law is not binding precedent, but can be highly persuasive.
17. Treaties cannot be directly applicable or self-executing. Where
a proposed treaty action will create obligations for New Zealand that are
inconsistent with existing domestic law, domestic law must authorise the
Government to enter into that treaty obligation. Section BH 1 of the Income
Tax Act 2007 (“ITA”) provides this authority in relation to EOI agreements.
18. Tax treaties, including EOI agreements, are given effect by Orders in
Council (made under subsection BH 1(4) of the ITA). The treaty provisions
are included in full in a schedule appended to the Order in Council, and are
thereby directly incorporated into (and form part of) New Zealand law. Once
given effect, the tax treaty provisions generally override the Inland Revenue
Acts (defined at Schedule 1 of the Tax Administration Act 1994, and essen-
tially encompassing all New Zealand tax legislation), the Official Information
Act 1982, and the Privacy Act 1993.
19. All New Zealand legislation is available online at www.legislation.
govt.nz/.
Tax system
1. The Local Government (Rating) Act 2002 gives local governments the power to
levy “rates” on land. Local body rates in New Zealand are generally thought of
as a charge for services rather than a tax. The definition of “tax” at section 3 of
the TAA does not include rates.
only on their New Zealand sourced income. The tax year for both individu-
als and companies is 1 April to 31 March, but non-standard balance dates/
accounting periods can be requested (for example, for a subsidiary to match
the balance date of its parent). The company tax rate is 28%, and has been
since the income year commencing on 1 April 2011. Individuals are taxed
at progressive rates which, from 1 April 2011, range from 10.5% on the first
dollar earned to 33%, which is the top marginal rate. Tax for salary and wage
earners is generally deducted at source under a system referred to as “PAYE”
or “Pay As You Earn”. All taxpayers (whether individual or non-individual)
are allocated a unique taxpayer identification number, known as an “IRD
number”.
23. The tax base is broad, but New Zealand generally does not tax capital
gains (with some exceptions, such as capital gains from loan arrangements,
from trading in “capital” items or from sale of real property within two years
of purchase). There are a number of concessionary rules that pertain to par-
ticular activities – such as mining, farming, forestry and films. There are also
some concessionary rules for venture capital investment into New Zealand.
An individual who becomes resident for tax purposes, having previously been
non-resident for at least 10 years, will enjoy a four year exemption from taxa-
tion of most categories of foreign-sourced income (provided they satisfy the
“transitional resident” criteria). There are no allowances for individuals, but
some tax credits are allowed – such as for foreign taxes paid.
24. Companies are resident in New Zealand for tax purposes if they
are incorporated or have their head office or centre of management in New
Zealand. They are also resident if control of the company by its directors is
exercised in New Zealand. Tax is paid at the company level, and again at
the shareholder level when profits are distributed, except for the so-called
Look-Through Companies (see paragraph below). A full imputation system
operates to prevent double taxation by providing that a credit for the company
tax paid is allowed against the shareholder’s tax liability.
25. A Look-Through Company (LTC) is a tax structure for New Zealand
companies with limited liability, which allows the company in question to
transfer its income and expenditure to its shareholders directly. The share-
holders of an LTC are liable for income tax on the LTC’s profits, while being
able to offset the LTC’s losses against their other income. Under the general
company law, an LTC retains its corporate obligations and benefits, such as
limited liability. New Zealand advises that LTCs were not intended to be used
as conduit vehicles for international investment by non-residents whereby
funds are invested through New Zealand rather than into New Zealand. To
restrict the use of LTCs in a conduit manner, as of 1 April 2017 the foreign
income that can be earned by a LTC that is controlled by foreign LTC hold-
ers is now limited to the greater of NZD 10 000 (EUR 6 000) and 20% of
the LTC’s gross income in the relevant income year. A definition of “foreign
LTC holder” provides the rule for determining how the foreign ownership of
LTCs is tested when applying the new foreign income restriction. It is defined
as “ownership interest held more than 50% by non-residents”. These changes
to the eligibility criteria were made in the Taxation (Annual Rates for 2016-
17, Closely Held Companies, and Remedial Matters) Act 2017 and apply for
income years beginning on or after 1 April 2017. There must be five or fewer
look-through counted owners (look-through counted owners who are relatives
or co-trustees are treated as one person). Look-through counted owners must
be either natural persons or trustees (including corporate trustees) (s. YA 1 of
the Income Tax Act 2007). As at 19 February 2018, there were 55 760 com-
panies with a LTC status in New Zealand.
26. General partnerships are treated as transparent for tax purposes
(section HG 2 of the ITA). Therefore, tax obligations and liabilities generally
fall on the partners rather than the partnership. Limited partnerships (other
than listed limited partnerships) are legal entities but are taxed as general
partnerships. A “listed limited partnership” (that is, a limited partnership
that is listed on a recognised stock exchange) is treated as a company for tax
purposes.
27. New Zealand tax law features rules such as controlled foreign com-
pany rules and a consolidation regime for companies. New Zealand’s tax
legislation also includes both a general anti-avoidance rule and a number
of specific anti-avoidance regimes (such as thin capitalisation and transfer
pricing rules).
28. New Zealand’s financial markets are small and highly concentrated.
New Zealand advised that, generally, the size of the local consumer base
does not support a large number of market participants. Approximately 75%
of money invested in financial system assets is held by New Zealand’s four
major banks. New Zealand has one major stock exchange, operated by the
New Zealand Stock Exchange (NZX). The top 10 equity stocks traded on
NZX’s main board make up 51% of the “S&P/NZX50” index. The most liquid
stocks are large infrastructure businesses such as airports, electricity genera-
tors and construction and telecommunications companies.
29. A large number of New Zealand companies are dual listed on the
Australian Securities Exchange (ASX), including many of the S&P NZX50
top 10 businesses. One reason for this is that many Australian funds cannot
invest in New Zealand entities under their investment mandate unless they
are also listed on the ASX.
30. The NZX Main Board (covering equity securities) has a market capi-
talisation of NZD 117.2 billion 2 (EUR 70.3 billion), which is approximately
45% of GDP (NZD 260 billion, as at Q4 2016). New Zealand advises that the
reasons for the low levels of capitalisation to GDP ratio include the follow-
ing factors: (i) retail investors have a low appetite to directly invest in stocks
and shares, as a consequence of relatively higher saving/investment in bank
deposits, unlisted equity (their own businesses) and residential housing;
(ii) local markets are small and therefore it is difficult for many businesses to
scale up to a size whereby listing becomes an attractive proposition; (iii) even
when businesses list, the NZX market exhibits low levels of liquidity outside
of the major stocks (which deters many businesses from listing); (iv) many
larger New Zealand companies are subsidiaries of overseas entities.
31. There are 24 registered banks in New Zealand. As well as being
regulated by the RBNZ for their banking activities, banks are also regulated
by the FMA for other financial markets activities in which they participate.
32. The table below indicates the value of assets and funds under man-
agement by financial institutions in New Zealand as at 31 December 2016.
*A Kauri bond is a bond denominated in New Zealand dollars that is issued by a foreign
(i.e. non New Zealand) issuer.
FATF Evaluation
35. New Zealand is a member of both the Financial Action Task Force
(FATF) and the Asia-Pacific Group on Money Laundering (APG). The FATF
and the APG last published a Mutual Evaluation Report (MER) for New
Zealand in 2009. 6 The 2009 MER placed New Zealand in a regular follow-up
process. New Zealand first reported back to the FATF in October 2011 (first
follow-up report). It was directed to report back in October 2013 on the basis
that relevant legislation had been promulgated but would not come fully into
force until 30 June 2013, and further initiatives being undertaken were not
expected to come to fruition until the end of 2012/early 2013.
36. In October 2013, the FATF approved the 2nd Follow-up Report of
New Zealand 7 recognising the significant progress it made in addressing the
deficiencies identified in the 2009 report and considered New Zealand could
3. This refers to the number of TCSPs registered with the Department of Internal
Affairs as at November 2017.
4. Source: New Zealand Law Society, as at March 2016.
5. Source: Inland Revenue, External Provider Relations, as at November 2017.
6. www.fatf-gafi.org/media/fatf/documents/reports/mer/MER%20New%20
Zealand%20ful.pdf.
7. www.fatf-gafi.org/media/fatf/documents/reports/mer/FUR-New-Zealand-2013.
pdf.
be removed from the regular follow-up process. The 2013 follow-up report
considered that New Zealand’s level of compliance with Recommendation 5
(Customer Due Diligence) was essentially equivalent to a level of Largely
Compliant. The level of compliance with Recommendations 33 (Transparency
and beneficial ownership of legal persons) and 34 (Transparency and ben-
eficial ownership of legal arrangements) were not yet equivalent to Largely
Compliant, because at the time, it could not be determined that information
on the ultimate beneficial owners of legal entities and arrangements were
accessible and/or up-to-date in all cases. It was also noted in that report
that New Zealand was in the process of passing additional legislation to
strengthen company registration requirements and requirements regarding
companies’ directors.
37. New Zealand’s next FATF evaluation under the 4th Round of Mutual
Evaluations is scheduled to commence in 2020.
Recent developments
43. Sections A.1, A.2 and A.3 evaluate the availability of ownership and
identity information for relevant entities and arrangements, the availability of
accounting information and the availability of bank information.
44. The 2011 Report concluded that Element A.1 was in place, but in
need of improvement and a rating Largely Compliant was assigned. A Phase 1
recommendation was made for New Zealand to ensure that ownership and
identity information was available for owners of companies where shares were
held by nominees. In addition, it was found that, while enforcement provi-
sions existed to ensure the accuracy of information provided to the Registrar
of Companies, they might not necessarily be effective for companies with
non-resident directors. A Phase 2 recommendation was added in this respect.
45. New Zealand has taken legislative action to address the two recom-
mendations referenced above.
46. The first recommendation on nominees has been adequately
addressed by the enactment of the AML/CFT Amendment Act 2017 in
August 2017. This act imposes customer due diligence obligations on law
firms, conveyancing practitioners or firms, accounting practices, real estate
agents and trust and company service providers (TCSPs), who, in the ordi-
nary course of business, act as, or arrange for a person to act as, a nominee
shareholder in relation to legal persons or legal arrangements. The CDD
obligations for persons acting as nominees will only start to apply as of:
1 July 2018 (for trust and company service providers, law firms, conveyanc-
ing practitioners and firms); 1 October 2018 (for accounting practices) and
1 January 2019 (for real estate agents). As such, a recommendation is added
to this report for New Zealand to monitor the implementation of the obliga-
tions established on persons acting as nominee shareholders to ensure that
they maintain information identifying the persons they act for.
has a tax number (as at 1 October 2015) and becomes an offshore person
must inform a current bank account to the Commissioner. After registration,
companies, trusts and partners of partnerships must file tax returns which
contain a field for a current bank account number to be provided. Returns
are generally pre-populated including information already provided by the
taxpayer. As such a taxpayer would be required to confirm if a bank account
indicated in the pre-populated return remains current or if a new account
should be indicated. It is possible to file a return without indicating a bank
account number if a taxpayer does not have one.
52. Legal entities, trusts and partners of partnerships that are not off-
shore persons are not legally required to provide bank account details or
details of an AML obligated person upon tax registration. The tax registra-
tion form contains a field for a bank account number to be provided but there
is no language implying that this is a mandatory field (the relevant field can
be read as a suggestion to expedite refunds). Legal entities are, nonetheless,
requested to include information on their current bank accounts (if they have
one) in their annual income tax return, as there is a field in the return for
that end and returns must be delivered complete. During the review period,
approximately 86% to 88% of companies and 93% to 95% of partnerships
complied with their income tax filing requirements. Of those, approximately
90% of companies and 78% of partnerships have informed the number of a
New Zealand bank account in their return in the years covered by the review
period (2014-16).
53. Moreover, there are a number of situations that contribute to the avail-
ability of beneficial ownership information in New Zealand. GST returns also
include a field for GST taxpayers to include bank account details (although
there is no explicit language included indicating that a bank account number
is mandatory). Also, in relation to legal entities which have their full legal
ownership chain within New Zealand, the information on the chain is required
to be available on the basis of company law filing requirements, in addition
to information on directors. Finally, many legal entities in New Zealand will
have a relationship with an AML obligated person (such as a bank or profes-
sionals – lawyers, accountants and TCSPs providing certain services). As a
result, the materiality of the legal gap concerning the availability of beneficial
ownership information for entities in New Zealand is considered to be small at
the present stage, and it will be even smaller when the provisions of the AML/
CFT Amendment Act 2017 come into force later in 2018.
54. During the current peer review period, New Zealand received
194 requests, of which approximately 14% related to beneficial ownership
information for relevant entities and arrangements, in particular trusts. New
Zealand advised that it receives very few EOI requests that seek only legal
ownership details, presumably because legal ownership information for
companies is publicly available on New Zealand’s Companies Office website
based on companies’ annual returns. Input from five EOI partners noted that
beneficial ownership information in relation to trusts or corporations has
been requested to and provided by New Zealand. No issues were raised by
peers concerning the availability of this type of information in New Zealand.
New Zealand reports that it has never been unable to respond to a request for
information due to the fact that information was not available in accordance
with the law.
55. The new table of determinations and ratings is as follows:
enactments (as listed in the table below). Unlimited liability companies exist
but are rare in New Zealand. They are typically used for purposes such as
nominee companies, where the persons depositing securities with the com-
pany wish to have certainty as to the liability of the company’s shareholders.
58. The table below identifies the different types of companies in New
Zealand, their governing laws, and the numbers at the end of the last review
and at the end of the present review period.
* An “overseas company” is defined in the Companies Act as a body corporate that is incorporated
outside New Zealand. An overseas company that commences to carry on business in New Zealand must
apply for registration with the Companies Office.
described in more detail in that section, further below. The following table 8
shows a summary of the legal requirements to maintain legal ownership
information in respect of companies:
8. The table shows each type of entity and whether the various rules applicable
require availability of information for “all” such entities, “some” or “none”.
“All” in this context means that every entity of this type created is required to
maintain ownership information for all its owners and that there are sanctions
and appropriate retention periods. “Some” in this context means that an entity
will be required to maintain information if certain conditions are met.
the registry a company which has failed to make an annual return (s. 371
and 318). The Registrar also has the authority to compel a person to comply
with the Act, with discretion to remove a company from the register for a
number of reasons, including failing to comply with the essential elements
under section 10 (s. 317 and s. 318). Where the annual return is delivered late,
a late filing penalty can be applied (Companies Act 1993 Regulations 1994
(s. 6 and Schedule 2)). Section 377 of the Companies Act also provides that
any person who, with respect to a document required by or for the purpose of
that Act, (a) makes, or authorises the making of, a statement in it that is false
or misleading in a material particular knowing it to be false or misleading;
or b) omits, or authorises the omission from it of any matter knowing that
the omission makes the document false or misleading in a material particu-
lar commits an offense and is liable on conviction to a fine not exceeding
NZD 200 000 or imprisonment for a term not exceeding five years (s. 373(4)).
62. New Zealand companies, including publicly traded companies, must
maintain a share register (s. 87). Entries in the share register are prima facie
evidence as to the legal title to shares (s. 89). The share register must record,
for all current shareholders and those that have been shareholders within the
last 10 years, an alphabetical list of the: (i) name(s); (ii) last known address;
and (iii) number of shares of each class held (s. 87(2)).
63. Failure to correctly maintain a share register is an offence (s. 87(4))
and, on conviction, a company can be liable to a fine of up to NZD 10 000
(EUR 6 000) (s. 373) and a director can also be liable to a fine of up to
NZD 10 000 (EUR 6 000) (s. 374). Section 190 of the Companies Act requires
the board of directors of a company to ensure that adequate measures exist
to prevent the records being falsified and detect any falsification of them.
Failure to comply with section 190 is an offence and, if convicted, a director
can be liable to a fine of up to NZD 10 000 (EUR 6 000) (s. 374).
9. A non-active company is not required to furnish a return of income, but must file
a Non-active Company Declaration.
Foreign companies
65. As noted in the overview to this report, a foreign incorporated com-
pany will be resident in New Zealand for tax purposes if its head office or
centre of management is in New Zealand, or if control of the company by its
directors is exercised in New Zealand (Section YD 2 of the ITA). Such com-
panies are not expressly required to keep a share register in New Zealand or
to provide shareholder information to the Companies Registrar. However, as
noted in the 2011 Report, these foreign companies would need to maintain
information about their shareholders to meet a number of tax obligations. In
particular, shareholding information must be maintained in order to assess:
whether income tax losses can be carried forward to future income years;
whether income tax losses can be offset to other group companies; whether
imputation credits can be carried forward and distributed; whether thin
capitalisation interest denials are required; and whether other entities are
associates. New Zealand’s IR reported having a comprehensive monitoring
programme for foreign-owned companies/multinational companies andthat
shareholder information is routinely checked by means of field audits or desk
reviews, to ensure foreign companies are complying with their New Zealand
tax obligations.
66. Moreover, since October 2015, companies which are incorporated
outside New Zealand but are resident in New Zealand for tax purposes (as
well as companies that are not resident but have income tax liability in New
Zealand) must inform in their tax registration form (i) a fully functional
New Zealand bank account or (ii) the name of a New Zealand AML report-
ing entity that has conducted customer due diligence on them (more details
on this requirement are provided in the subsection on beneficial owner-
ship). For foreign companies that already had a tax registration number as
at 1 October 2015, they are required to inform a current bank account to the
Commissioner. Foreign companies that are resident in New Zealand for tax
purposes must also file tax returns which contain a field for a current bank
account number to be provided (if they have one). In the process of identify-
ing the beneficial owner of a customer, AML reporting entities must identify
who owns more than 25% of the customer. AML reporting entities will be
required to understand the ownership structure of the customer, subject to a
risk-based approach. Documentation identifying the legal owners of custom-
ers is likely to be retained in this process.
67. The 2011 Report included an in-text recommendation for New
Zealand to continue to monitor the availability of ownership and identity
information for foreign incorporated but tax resident companies, in particular
any exchange of information requests that cannot be satisfied because the
information is not maintained (para. 83 of the 2011 Report).
68. New Zealand reports that it has continued to monitor the availabil-
ity of ownership and identity information for foreign incorporated but tax
resident companies. In the course of New Zealand’s EOI programme, New
Zealand informed that it has never been unable to satisfy an information
request because information was not maintained and made available as and
when required.
Nominee Shareholders
69. Nominee shareholders are permitted in New Zealand. The 2011
Report noted that nominees were not required to maintain ownership and
identity information in respect of all persons for whom they act as legal
owners. That report recommended that an obligation should be established
for all nominees to maintain relevant ownership information where they act
as the legal owners on behalf of any other person.
70. This report finds that this recommendation has been addressed by
New Zealand. The Anti-Money Laundering and Countering Financing of
Terrorism Amendment Act 2017 imposes customer due diligence obligations
on law firms, conveyancing practitioners or firms, accounting practices, real
estate agents and trust and company service providers (TCSPs), who, in the
ordinary course of business, act as, or arrange for a person to act as, nominee
shareholder in relation to legal persons or legal arrangements. The CDD obli-
gations for persons acting as nominees will start to apply as of: 1 July 2018
(for trust and company service providers, law firms, conveyancing practition-
ers and firms); 1 October 2018 (for accounting practices) and 1 January 2019
(for real estate agents).
71. The 2017 amendments broadly cover professionals that would be
performing nominee services by way of business. The CDD obligations do
not apply to persons acting as nominees not by way of business. New Zealand
is recommended to monitor the impact of this on EOI in practice on an on-
going basis.
72. In addition to the AML framework, the Companies Act provides
(pursuant to the Companies Amendment Act 2014) that the Registrar may
require the disclosure details of a person who has a control interest in a
share (s. 365F Companies Act). The powers attributed to the Registrar do not
explicitly require a nominee to maintain ownership and identity information
concerning the nominator. A nominee shareholder would be required to dis-
close the control interests of the nominator only to the extent to which it is
known to the nominee. As such, information on the identity of the nominator
may not be available in all instances (see in-text recommendation added in
the paragraph above).
Company removals
Oversight by IR
81. New Zealand does not specifically rely on the filing requirements
with IR for the availability of legal ownership and identity information. IR
has a comprehensive compliance programme which includes a strong focus
their customers, and their processes for obtaining, verifying and maintaining
this information is supervised by their respective AML supervisor. Moreover,
in relation to legal entities which have their full ownership chain within New
Zealand, information on the chain as well as directors is required to be avail-
able on the basis of company law filing requirements. The following table 10
shows a summary of the legal requirements to maintain beneficial ownership
information in respect of companies.
Tax law
84. Since 1 October 2015, tax law provides for special tax registration
requirements for offshore persons. The following companies are considered
to be offshore persons (ss. 24BA and 3 TAA and s. 7(2) of the Overseas
Investment Act 2005):
• a company that is incorporated outside New Zealand or is a 25% or
more subsidiary of a company incorporated outside New Zealand, or
• a company (A) if an overseas person or persons (which can be indi-
viduals or non-individuals, as defined in s. 7(2) of the Overseas
Investment Act 2005) have:
i. 25% or more of any class of A’s securities, or
ii. the power to control the composition of 25% or more of A’s gov-
erning body, or
iii. the right to exercise or control the exercise of 25% or more of the
voting power at a meeting of A.
85. Companies that fall within those categories must inform upon registra-
tion (i) a fully functional New Zealand bank account; or (ii) information on a
10. The table shows each type of entity and whether the various rules applicable
require availability of information for “all” such entities, “some” or “none”.
“All” in this context means that every entity of this type created is required to
maintain ownership information for all its owners and that there are sanctions
and appropriate retention periods. “Some” in this context means that an entity
will be required to maintain information if certain conditions are met.
New Zealand AML reporting entity that has conducted customer due diligence
on them (s. 24BA TAA and form IR744). Persons that are already registered for
tax purposes (as at 1 October 2015) and become an offshore person are required
to provide a current bank account to the Commissioner (s. 24BA(2) TAA).
Moreover, tax returns also require that a company provide their bank account
number (if they have one) or correct their bank account number on the form
(where a person completes their tax returns electronically, their bank account
number is generally pre-populated on the electronic form (IR4)).
86. In relation to LTCs, their shareholders must be either natural persons
or trustees (including corporate trustees). Pursuant to the Income Tax Act,
there must be five or fewer look-through counted owners (section YA 1). The
look-through counted owner test determines the number of look-through
owners a company has for the purposes of the LTC rules. The test does this
by identifying the relationships between individual shareholders, and by
looking through trustee shareholders to the natural person beneficiaries of
the trust, or through a shareholding LTC to the ultimate natural person or
trustee shareholders. 11 In this process, the chain of ownership is disclosed.
The LTC’s income tax return (IR7 form) does not collect information on bank
accounts. However, the shareholders must file separate returns of income
which include their IRD number (along with details of attributed income/
losses), as well as a field to provide a bank account. If a LTC or one of its
shareholders is an offshore person, this person would be required to inform
a current bank account to the Commissioner. New Zealand advises that the
overall purpose of the LTCs rules is to allow shareholders to access start-up
losses and restrictions have been put in place on their use by non-residents
which means they are mainly confined to small business/investment activities
carried on in New Zealand.
87. Companies that are resident in New Zealand for tax purposes but do
not fall within the definition of an offshore person are not legally required to
provide information on a New Zealand bank account or an AML reporting
entity upon registration. However, those companies are required to file tax
registration forms which contain a field for a bank account number to be pro-
vided but there is no language in those forms providing that providing bank
11. If a company is the beneficiary of a trust and has received income from the
LTC as beneficiary income in that income year, or in any of the three preceding
income years, the company itself is not seen as a look-through counted owner.
Instead, every natural person who has a voting interest (or market value interest,
if a market value circumstance exists) in relation to that company is counted as a
separate look-through counted owner. This test will no longer apply by the 2020-
21 income year because after the 2016-17 income year when a trustee owner
makes a distribution to a beneficiary which is a company the LTC no longer
meets the eligibility criteria.
Company law
90. In relation to New Zealand incorporated companies owned by New
Zealand entities, arrangements or individuals, full information on the legal
ownership chain is required to be available with the Companies Office or
other information holders in New Zealand, in accordance with the law. Also
New Zealand will have information on the directors of all New Zealand
incorporated companies.
91. Moreover, pursuant to the Companies Amendment Act 2014, the
Registrar may require a company or limited partnership to provide information
on persons that have control interests in the company or limited partnership
(s. 365F(1)(c) Companies Act). The company and partnership only need to
make such a disclosure where this information is known to the company or
limited partnership (s. 365F(2)). Moreover, the Registrar may require a person
to disclose the control interests that the specified person has in shares of a
company and of the circumstances that give rise to those interests (s. 365F(1)
(a)). A person has a control interest in a share if the person (a) is a shareholder;
or (b) is a beneficial owner of the share; or (c) has the power to exercise, or to
control the exercise of, a right to vote attached to the share; or (d) has the power
to acquire or dispose of, or to control the acquisition or disposal of, the share
(s. 365B). The Registrar may request this information only when requested to
do so by a domestic or international government agency for law enforcement
of terrorism that it may reasonably expect to face in the course of its business
(s. 58). The Act provides further guidance on the factors to be considered when
assessing risk. The risk assessment must be in writing and must identify the
risks faced by the reporting entity in the course of its business; and describe
how the reporting entity will ensure that the assessment remains current.
105. If a reporting entity is unable to conduct CDD, it must not establish
a business relationship with the customer (or it must terminate any existing
business relationship with the customer) and should consider whether to make
a suspicious activity report (s. 37 AML/CFT Act).
106. Except in relation to simplified due diligence (see below), identify-
ing the beneficial owner of a customer is an obligation that must be satisfied,
regardless of the level of risk associated with that customer (Beneficial
Ownership Guideline). However, when deciding what reasonable steps to take
to satisfy themselves that the customer’s identity and information is correct,
reporting entities may vary their approach depending on the risk assessment
of the customer (Beneficial Ownership Guideline).
107. Section 13 of the AML Act allows some flexibility in terms of the
documentation to verify the beneficial owner of a customer. It provides that
verification of identity must be done on the basis of (i) documents, data, or
information issued by a reliable and independent source; or (ii) any other basis
applying to a specified situation, customer, product, service, business relation-
ship, or transaction prescribed by regulations. New Zealand advised that there
is enough detail and flexibility in the AML Act and there was no need to issue
regulations to cover specific situations, customers, products etc. As the Act
does refer to the prescription of regulations, it remains unclear the circum-
stances where AML reporting entities can rely on other sources than a reliable
and independent source. New Zealand is recommended to clarify this aspect.
108. The Beneficial Ownership Guideline further notes that “It is good
practice to keep detailed records of all decisions and retain customer due
diligence and relevant records in a readily auditable manner. It is important
for you to record the rationale behind any decision that you make. Anyone
reading the notes years later should be able to understand why you made a
risk-based decision”.
according to the level of risk involved: (i) there has been a material change
in the nature and purpose of the business relationship, and (ii) the reporting
entity considers that it has insufficient information about the customer (s. 14).
Reporting entities are required to regularly review the CDD information that
they hold in accordance with the on-going due diligence requirements in s. 31
(see on-going CDD above). If the AML obligated entity has not collected
beneficial ownership at the time of client on boarding (or collected informa-
tion under a lower standard as per requirements under previous legislation),
there is no explicit obligations for the AML obligated entity to collect ben-
eficial ownership information as defined under the AML Act in the course
of on-going monitoring in all cases; however, New Zealand supports that
this is required and done in practice on the basis of the paramount obligation
to identify beneficial owners provided under section 14(1) described above.
New Zealand should monitor on an on-going basis that beneficial ownership
information is available for all New Zealand incorporated companies and all
foreign companies that are resident for tax purposes in New Zealand.
118. Pursuant to the 2017 amendments to the AML/CFT Act, the obliga-
tion to perform CDD and identify beneficial owners will commence on:
• 1 July 2018 for law firms, trust and company service providers pro-
viding certain services (such as nominee services) and conveyancing
practitioners and firms
• 1 October 2018 for accounting practices
• 1 January 2019 for real estate agents.
Tax compliance
125. IR has a comprehensive compliance programme which includes
a strong focus on taxpayer compliance with their registration and filing
obligations. These obligations are particularly relevant in relation to the avail-
ability of beneficial ownership information, as certain taxpayers (that are
incorporated outside New Zealand or have at least 25% non-resident owner-
ship or control) must inform upon registration a New Zealand bank account
number or the name of a reporting entity which has conducted CDD on them.
Moreover, the tax registration forms and tax returns for other taxpayers also
contain a field for a bank account, although providing this information is not
mandatory.
126. Over the last decade, IR has moved from predominantly enforcing
compliance to facilitating compliance. This has meant greater focus on a
“right from the start approach”, involving various preventative interventions
including process/systems improvements, increasing awareness and education.
127. All persons, natural or otherwise, require a tax identification number
(known as an IRD number in New Zealand) if they earn income from any
source, apply for a particular benefit, file tax returns or buy sell or transfer
New Zealand property. In addition to the information obtained on registra-
tion from legal entities and arrangements registered with IR, all taxpayers are
required to, as part of their respective annual return processes, inform a bank
account should they wish to expedite refunds.
128. The table below includes statistics on the number of companies
applying for an IRD Number by year, the number of companies registered/
incorporated with the Companies Office per year.
129. New Zealand explained that the variance in numbers above can be one
or a combination of any of the factors below: (i) timing variance (where the
company has registered in one calendar year with the Companies Office and
applies for an IRD number in the next calendar year); (ii) the situation where
companies registered in New Zealand, but are yet to carry out any taxable
activity in New Zealand; and (iii) the situation of companies that register in
New Zealand purely for name protection purposes and have not yet obtained an
IRD number. Conducting any significant business in New Zealand is unlikely
without obtaining an IRD number. New Zealand explained that companies
need their IRD number in order to, among other activities, sell goods and ser-
vices from New Zealand (GST registration), register as an employer, buy, sell
or transfer property in New Zealand, engage in the property rental business.
130. Annual return filing rates by companies for the years covered within
the review period were: 87.8% for year 2014, 88.2% for 2015 and 85.9% for
2016. Non-filers are subject to IR’s enforcement programme.In terms of
enforcement with filing obligations, IR reports that it has dedicated funding
from government to specifically chase unfiled returns. This corresponds to
160 full time equivalent staff.
131. The review of tax returns showed that at least approximately 90%
(90.3% in 2014, 90.4% in 2015 and 89.7% in 2016) of the companies indi-
cated having a bank account. New Zealand advises that 94.3% of these bank
accounts are with New Zealand registered banks. New Zealand further
advises that it is in the process of clarifying and correcting the issue found
with approximately 5.7% of taxpayers that informed a non-New Zealand bank
account in their returns. New Zealand further notes that IR holds information
on other New Zealand bank accounts of these taxpayers due to disclosures in
other returns/registrations.
132. For the “offshore companies”, to evidence the existence of the bank
account, the company must also provide to the IRD the information described
in form IR984 being: (a) a New Zealand bank statement showing the company’s
name as customer’s name, the bank account number and at least one deposit
and one withdrawal of different amounts; or (b) a letter from the bank showing
the company’s name as customer’s name, the bank account number and stat-
ing that the account is (i) a fully functional bank account; or (ii) is an active
AML supervision
134. The Ministry of Justice is the lead policy agency for New Zealand’s
implementation of the AML standards and is responsible for drafting and
administering the AML legislation. The three supervisors tasked with super-
vision of the AML regime are:
• the Reserve Bank of New Zealand (RBNZ), which supervises banks,
life insurers and non-bank deposit takers
• the Financial Markets Authority (FMA), which supervises, among
others, issuers of securities, derivatives issuers and dealers, fund
managers, brokers and custodians, financial advisers, equity crowd-
funding platforms and peer-to-peer lenders
• the Department of Internal Affairs (DIA), which supervises, among
others, trust and company service providers. In August 2017, the
DIA was appointed to supervise lawyers, accountants, conveyancing
practitioners and real estate agents.
135. Another key government agency is the FIU. The FIU provides finan-
cial intelligence relating to suspicious transactions, money laundering, the
financing of terrorism and other serious offences.
136. The AML/CFT Act has been in force since 30 June 2013. Since then,
the AML/CFT supervisors have undertaken a wide range of supervisory and
enforcement activities, and monitored compliance with obligations estab-
lished in the Act. Supervision by the three AML/CFT supervisors is focused
on evaluating the systems reporting entities have in place to capture and
retain the information required. The reviews involve evaluations of:
• reporting entities’ risk assessments
• AML/CFT programmes
• whether a compliance officer has been appointed to administer the
AML/CFT programme
• CDD processes and customer identification and verification
• the reporting entities’ suspicious transaction reporting, auditing and
annual reporting systems and processes.
137. The AML/CFT supervisors have a range of tools available including:
• Desk based reviews: all supervisors use desk-based reviews as a
tool to monitor compliance and inform subsequent supervision. In
essence, a desk-based review will involve the supervisor requesting
information, documents and records, relevant to one or more AML
obligation from a reporting entity. These documents and records
are reviewed and analysed against a reporting entity’s AML obliga-
tions and the outcome used to determine what subsequent action
needs to take place. For instance, a desk-based review may highlight
inadequacies in a reporting entity’s processes for establishing the
beneficial ownership of a customer.
• On site reviews: All supervisors use on-site reviews as a tool to
monitor compliance and inform subsequent supervision. This gener-
ally involves staff of the relevant supervisor reviewing documents
and records, testing controls and meeting with the reporting entity’s
employees, particularly those involved in the day-to-day operations
of ensuring the reporting entity is compliant with its AML/CFT
obligations.
• Guidance and education: the supervisors have produced a large
amount of education materials to assist reporting entities comply with
their obligations under the AML/CFT Act, including CDD and the
identification of beneficial owners.
• Baseline monitoring: Each reporting entity must prepare an annual
report based on its risk assessment and AML/CFT programme fol-
lowing a prescribed form.
• AML/CFT audits: Section 59 of the AML/CFT Act requires that
each reporting entity review its risk assessment and AML/CFT
Supervision by RBNZ
138. The RBNZ supervises 24 registered banks, 14 life insurance provid-
ers, 27 non-bank deposit takers and 45 entities who are the members of a
designated business group. Of the 24 registered banks, the five largest banks
were responsible for handling approximately 90% of the volume and value of
transactions during the year. The RBNZ’s AML/CFT supervision team has
four full time employees.
139. Banks are considered higher risk reporting entities, as such, have
a dedicated relationship manager within RBNZ’s AML/CFT team and are
subject to an on-going cycle of proactive engagement. They also receive more
frequent and targeted reviews.
140. The RBNZ has completed over 50 assessments since the AML/
CFT supervision commenced on 30 June 2013. The vast majority of on-site
reviews have been on registered banks, with each registered bank being
reviewed at least once, 18 registered banks visited twice, and six registered
banks being reviewed three times. New Zealand reports that there exists
generally a good level of compliance response in the New Zealand bank-
ing sector. Whilst matters of varying severity are uncovered in each onsite
review, most are minor in nature and are dealt with via internal supervisory
action or, occasionally, formal warnings. None have reached the level of
severity that they would require the imposition of a fine.
141. In November 2016, the RBNZ formally and publicly warned one
bank under section 80 of the AML/CFT Act. The RBNZ had reasonable
grounds to believe that between 30 June 2013 and 9 June 2016, the bank
was not reviewing and keeping up to date its AML/CFT risk assessment as
required under section 59 of the Act, despite being advised it was required
to do so by the RBNZ following an on-site review in 2013. The bank has
accepted the RBNZ’s findings, and has taken immediate steps to review its
risk assessment and amend deficiencies. A follow-up review carried out by
the RBNZ in October 2017 attested that sufficient progress was made.
142. In December 2016, the RBNZ also issued a formal public warning
to a credit union that had, inter alia, failed to meet the obligation to conduct
on-going CDD and account monitoring (section 31(2)) and the obligation to
comply with CDD requirements, including on-going CDD and account moni-
toring (section 57(c)).
Supervision by DIA
143. As at 31 December 2016, the DIA had 953 reporting entities listed,
including 111 TCSPs. 15 There is no licensing requirements for TCSPs in New
Zealand and the DIA has to identify relevant reporting entities. In practice,
the DIA informs that this work is facilitated by the fact that reporting entities
are very willing to report to the DIA who their competitors are that should
also be supervised. The DIA’s supervision team has 20 full time employ-
ees. Additional 40 to 50 employees are expected to be hired, following the
increased responsibilities concerning the supervision of lawyers, accountants,
conveyancing practitioners and real estate agents.
144. Within the 14 sub-sectors the DIA supervises, there are three high-
risk subsectors, being casinos, TCSPs and remitters who transfer funds
internationally. These three sub-sectors are the focus of DIA’s supervisory
attention.
145. In its most recent surveys, the DIA found that there is a good level of
awareness across the sector of the obligations under the AML/CFT Act. From
1 July 2015 to 20 May 2016, the DIA conducted 80 desk-based reviews and 21
on-site inspections. Four formal warnings were issued under section 80 of the
AML/CFT Act including one public formal warning (discussed below). There
were three enforceable undertakings completed in the same period.
146. On 2 September 2015, the DIA published its first public summary of
a formal warning, issued to a TCSP following an investigation. The investiga-
tion identified that the TCSP had failed to conduct CDD as required, failed
to adequately monitor accounts and transactions, failed to keep adequate
records and failed to ensure that its branches complied with all relevant
AML/CFT obligations. DIA reports that it will continue to monitor the TCSP
in question and consider further enforcement action, including the imposition
of penalties, if compliance standards are not improved.
Supervision by FMA
147. The FMA supervises around 800 reporting entities which are required
to comply with the AML/CFT Act. Roughly two-thirds define themselves as
15. The DIA maintains a list of its AML/CFT reporting entities, classified by sector,
on its website: https://www.dia.govt.nz/diawebsite.nsf/wpg_URL/Services-
Anti-Money-Laundering-List-of-Reporting-Entities?OpenDocument. The list of
reporting entities is not exhaustive or conclusive and is the subject to change.
16. FMA has produced numerous documents highlighting both its supervisory
and enforcement measures, and efforts undertaken to evaluate the level of
compliance under the AML/CFT. These reports are available online at https://
fma.govt.nz/news/reports-and-papers/monitoring-and-compliance-reports/
amlcft-monitoring-report/
A.1.3. Partnerships
152. The 2011 Report (see paras. 97-117) found that there were three types
of partnerships in New Zealand: general partnerships, limited partnerships
and special partnerships. Information on each type of partnership as well as
on overseas limited partnerships is included in the table below.
Numbers as
Numbers as at reported in the
Type of Governing 31 December 2011 Report (as
Partnership Description law 2016 at 30 June 2009)
General A Partnership is the relation which subsists between Partnership 113 696 N/A
partnerships persons carrying on a business in common with a Act 1908
view to profit (s. 4(1) of the Partnership Act 1908).
A partnership is not a legal entity nor is it separate
from the individual partners that comprise the
partnership. However, a partnership is a distinct
commercial entity for accounting purposes, with each
partner jointly and severally liable for the liabilities of
the partnership.
A partnership relationship is typically formalised by a
partnership agreement, but a written agreement is not
essential and the existence of a partnership can be
determined based on facts and a consideration of all
surrounding circumstances.
Limited Limited partnerships are a form of partnership LP Act 2 174 200
partnerships involving general partners (who are liable for all the
debts and liabilities of the partnership) and limited
partners (who are liable to the extent of their capital
contribution to the partnership).
Overseas An overseas limited partnership is a limited LP Act 13 Overseas limited
limited partnership that has been formed in a country other partnerships
partnerships than New Zealand, but because it is engaged in
business activities in New Zealand it must register as
an overseas limited partnership.
Numbers as
Numbers as at reported in the
Type of Governing 31 December 2011 Report (as
Partnership Description law 2016 at 30 June 2009)
Special Prior to the passage of the LP Act, the Partnership N/A N/A N/A
partnerships Act 1908 made provision for a special type of
partnership known as a special partnership. These
typically comprised a general partner that carried on
the partnership business and several special partners
who contributed capital. The special partners were
only liable for partnership debts to the extent of the
capital they contributed.
Companies Registrar
155. The Companies Office has oversight of New Zealand and overseas
limited partnerships, generally in a similar way as it does in relation to
companies. The Companies Office maintains publicly-available registers of
limited partnerships and overseas limited partnerships. Details of limited
partners are not publically available on the Limited Partnerships Register but
are accessible by IR.
156. On formation, checks are performed to ensure that proposed gen-
eral partners are not disqualified on the basis of having been bankrupt or
convicted of dishonesty offences. Where an application for incorporation
involves a general partner or limited partner that is not domiciled or incor-
porated in New Zealand, or the application involves New Zealand persons/
bodies corporate that are acting as a trustee for an overseas entity, the
Registrar will require the additional information (where applicable) in order
to be satisfied that the application has been properly completed, includ-
ing (i) evidence of the existence of all general and limited partners that
are companies, incorporated trusts or some other legal entity (i.e. copies of
original trust deeds and certificates of incorporation in their home country);
(ii) evidence that the entities named as general or limited partners have their
registered office or business address at the addresses given in the partnership
agreement (or on the limited partnership application if different).
157. Limited partnerships and overseas partnerships which failed to file
annual returns are removed from the Registrar. The procedure is the same
one that applies to company. The following table sets out the number of
removals from the Companies Office Register in the year 2015-16 and the
year 2016-17.
Partnership removals
Inland Revenue
158. All partnerships that carry on business in New Zealand are required
to file tax returns. The partnership return includes a list of the names of all
partners in the partnership (including limited partners) and their addresses.
IR monitors compliance and chase late-filers. During the review period, the
compliance rate with tax filing obligations by partnerships was as follows:
94.9% in 2014, 94.2% in 2015 and 92.8% in 2016.
A.1.4. Trusts
166. New Zealand, as a common law jurisdiction and former colony of
Britain, inherited the English concept of trusts.
167. The 2011 Report (paras. 118-138) found that New Zealand law
required the maintenance of information that identified the settlor, trustee,
and beneficiaries of trusts. Trustees were obliged to furnish a return of
income to IR if the trust derived New Zealand taxable income or made a
taxable distribution to beneficiaries. The return detailed the taxable income
distributed and required the identification of the beneficiaries. Where no
return was required (e.g. when no taxable income or distributions were made),
New Zealand trust disclosure and record keeping requirements ensured the
maintenance of identity information of trustees, settlors and beneficiaries.
Trusts with a foreign resident settlor and a New Zealand resident trustee were
required to register with IR. Moreover, some types of trusts could elect to be
registered to obtain certain benefits (i.e. charitable trusts that can register
under Charitable Trusts Act 1957 or the Charities Act 1995). Moreover, IR
had broad powers under the TAA to require a resident settlor or trustee to
provide particulars regarding the New Zealand trust.
168. The 2016 ToR contains an additional requirement concerning the
availability of beneficial ownership information. This would generally
include, in addition to information on the identity of the settlor, the trustee(s),
the beneficiaries or class of beneficiaries, information on the identity of the
protector (if any) 17 and any other natural person exercising ultimate effective
control over the trust.
169. Since the 2011 Report, New Zealand has completely revamped the
regime applicable to trusts having a New Zealand resident trustee and non-
resident settlor. 18 After media reports and commentaries on the Panama
Papers asserted that New Zealand foreign trusts were being used by wealthy
individuals in structures that facilitated tax evasion, aggressive tax plan-
ning and money laundering and hiding of assets, New Zealand conducted an
extensive government inquiry to examine the existing rules. The inquiry, 19
published in June 2016, concluded that, while, in theory, New Zealand’s pre-
vious tax disclosure combined with exchange of information arrangements
could have been sufficient to deter tax abuse and its anti-money laundering
rules ensured that funds held by foreign trusts are from legitimate sources,
under the law enforcement practices at the time the level of detection by
authorities was low. As such, the inquiry considered that a significant
increase in information disclosed when a trust sets up, annual reporting and
increased enforcement, would satisfactorily address the issues identified.
Those measures have been taken by New Zealand and a new regime came
into effect in February 2017.
170. In summary, the combination of tax disclosure rules, AML obliga-
tions introduced on professional trustees and common law obligations ensure
that information that identifies settlors, trustees and beneficiaries and other
beneficial owners of trusts. Since the tax and AML rules have been enacted
recently, their effectiveness in practice has not been fully ascertained and
recommendations have been added in in the box of A.1 for New Zealand to
ensure their implementation in practice.
17. In trust law, a protector is a person appointed under the trust instrument to direct
or restrain the trustees in relation to their administration of the trust.
18. The regime applies to foreign trusts defined in the TAA as follows: a foreign
trust is one established in New Zealand for which no settlor has been a New
Zealand resident. New Zealand’s rules for taxing the income of trusts are largely
based on the residence of the settlor regardless of the residence of trustee(s).
19. Available at www.treasury.govt.nz/publications/reviews-consultation/foreign-
trust-disclosure-rules/pdfs/report-giftdr-27jun2016.pdf.
Number of trusts as at
Type of trust December 2016 Current disclosure rules
Trusts created under 332 751 (based on the number The trustee(s) must furnish a return of income if the trust
New Zealand or of such trusts filing tax returns in derives taxable income or makes a taxable distribution to
foreign law with New New Zealand) beneficiaries (s. 59 TAA).
Zealand trustee The return requires the identification of the beneficiaries.
and resident settlor In general, for trusts with a resident settlor, both New
(non-charitable) Zealand and foreign sourced income are taxable in New
Zealand.
Trusts created 11 750 (this number refers to trusts Tax registration requirements apply (s. 59B-D of the TAA).
under New Zealand that have registered with IR under As of February 2017, they require identity information
or foreign law the previous regime; since the of: (i) settlor, (ii) each person with a power to appoint or
with new Zealand new regime has been established dismiss a trustee, to amend the trust deed or remove a
trustee and a non- 3 489 foreign trusts registrations beneficiary; (iii) each person with a power to control the
resident settlor have been received) exercise of a power referred in (ii) above; (iv) each person
(non-charitable) with a power to control a trustee in the administration of the
trust; (v) each trustee; (vi) for fixed trusts, each beneficiary
and each nominee for a beneficiary; (vii) for discretionary
trusts, each beneficiary or class of beneficiary sufficient
for the Commissioner to determine, when a distribution is
made under the trust, whether a person is a beneficiary
(s. 59B). Those details must be provided regardless of
whether the trust has tax liability in New Zealand. A copy of
the trust deed must also be provided. An annual return on
settlements received (identifying the name of settlors) and
distributions made (identifying the name of beneficiaries,
their physical residential address, their jurisdiction of tax
residence, and their taxpayer identification number) is also
required (form IR900).
Charitable trusts 24 009 (this refers to the number Charitable trusts registered with the Registrar of
with a New Zealand of charitable trust boards Incorporated Societies: file trust deed and all changes to
resident trustee registered with the Registrar trust deed, name of the charitable trust board and changes
of Incorporated Societies as at to the address of the charitable trust board (Charitable
31 December 2016). As at 1 March Trusts Act 1957).
2017, there were 27 915 registered Charitable trusts registered with the Department of Internal
charities in New Zealand (including Affairs: file trust deed and to file annual returns including
a range entities and arrangements up to date details of all officers, and beneficiaries (Charities
that can be registered as charities Act 1995).
under the Charities Act – such
as companies, charitable trusts,
societies).
apply. IR reports that it is working closely with trustees to ensure that they
fully understand the new requirements to register and file annual returns.
Whether the trustee is aware of his or her tax responsibilities is a question
of fact and is determined on a case-by-case basis. If a resident trustee has
failed to comply with these rules and the trustee knew or ought to have
known about his or her tax responsibilities as a trustee of a foreign trust, the
trustee will be in breach of section 143A and, if convicted, will be subject to
a fine not exceeding NZD 50 000 (EUR 30 000) and/or imprisonment. New
Zealand is recommended to monitor that enforcement provisions are effective
to ensure the availability of information in all cases.
176. Finally, a tax registration requirement applies to trusts that are con-
sidered to be overseas trusts and have taxable income in New Zealand. Those
trusts would be required to report a New Zealand bank account or the details
of a reporting entity that has conducted CDD on the trust. This information is
also required to be provided if a trust already has an IRD number, and, after
1 October 2015, it becomes an offshore trust. A trust would be an overseas
trust if: (i) 25% or more of its governing body are overseas persons; or (ii) an
overseas person or persons have a beneficial interest in or entitlement to
25% or more of the trust property; or (iii) 25% or more of the persons having
the right to amend or control the amendment of the trust deed are overseas
persons; or 25% or more of the persons having the right to control the com-
position of A’s governing body are overseas persons. Trusts having taxable
income in New Zealand are also required to file tax returns which contain a
field for the trust to provide a bank account number or correct a bank account
number that may have been already pre-populated in the form (IR6).
AML/CFT obligations
177. Trust formation can be completed by professionals such as TCSPs,
lawyers and accountants; however, engaging a service provider is not a
requirement to form a trust. The August 2017 amendments to the AML/CFT
Act will require CDD to be conducted by law firms, conveyancing practition-
ers, incorporated conveyancing firms, accounting practices, real estate agents,
and TCSPs, who, in the ordinary course of business: (i) act as a formation
agent of legal persons or legal arrangements; (ii) acting as, or arranging for
a person to act as, a trustee in relation to legal arrangements; (iii) manage
client funds (other than sums paid as fees for professional services), accounts,
securities, or other assets (AML/CFT Act, s. 5). A TCSP is broadly defined as
a person (other than the other listed professionals) that carries out one of the
listed activities, including acting as a trustee (AML/CFT Act, s. 5). The CDD
requirements will enter into force as of 1 July 2018 (for law firms, TCSPs pro-
viding trustee services and conveyancing practitioners and firms); 1 October
2018 for accounting practices; and 1 January 2019 for real estate agents.
Inland Revenue
182. During the review period, New Zealand conducted an extensive
inquiry in its foreign trust regime, resulting in the introduction of a more
demanding disclosure regime, which is administered by the International
Revenue Strategy team of IR (which also takes care of EOI and ensures that
relevant trust information can be shared with EOI partners). During this
period, IR also carried out audits of major TCSPs. As the government inquiry
on foreign trusts 22 noted at paragraph 6.14, these audits have resulted in a
number of spontaneous exchanges of information:
Over the past seven years there have been 142 exchanges of
information between IRD and foreign tax authorities across 23
countries in relation to foreign trusts. Of these, about 80% have
been proactive releases (known as ‘spontaneous exchanges’)
where IRD identifies a matter that may be of interest to an off-
shore authority and sends information to them. About 20% are in
response to requests from foreign tax authorities.
183. As at 23 December 2016, there were 11 750 foreign trusts (trusts
with a non-resident settlor and a resident trustee) in existence and eight
major TCSPs who administer more than 60% of the foreign trusts in New
Zealand. The revised Foreign Trust Registration Regime has been in force in
New Zealand since 21 February 2017. As such, no supervisory enforcement
measures were applied during the peer review period in respect of this new
regime. IR reports that it has been working closely with trustees to ensure
they understand fully the new requirements to register and to file annual
returns. IR has examined each registration application received and its inten-
tion is to carry out a range of risk-based compliance activities during 2018,
including a full reconciliation between disclosures received previously and
new registrations, as well as engaging with the DIA and FIU with whom IR
is sharing registration information.
A.1.5. Foundations
186. New Zealand’s law does not allow for the creation of foundations.
189. The 2011 Report concluded that any legal entity or arrangement
which carried on business in New Zealand, carried on any other activity
for the purpose of deriving assessable income, or made, held, or disposed
of any investment (for the purpose of deriving any assessable income) was
obliged to maintain a full range of accounting records, including underlying
documentation, for a minimum of seven years. Information received from
New Zealand’s peers noted that in all cases New Zealand had been able to
provide the requested accounting records. Element A.2 was determined to
be “in place” and rated Compliant. A recommendation was made for New
Zealand to require that accounting records and underlying documentation be
maintained for liquidated companies for at least five years.
190. This review finds New Zealand is in the process of addressing the
above-mentioned recommendation and that it equally applies to liquidated
limited partnerships. A requirement that accounting records and underly-
ing documentation be maintained for these entities for at least six years is
included in the Insolvency Practitioners Bill. It is expected that this Bill be
enacted sometime between March 2018 and June 2019. In the meantime, the
recommendation is retained. The gap identified had no practical impact on
EOI during the review period.
23. A provisional taxpayer means a person who is liable to pay provisional tax
under section RC 3 of the ITA. Provisional taxpayers generally include a person
whose residual income for the tax year is more than NZD 2 500 (EUR 1 500) or
a person who chooses to pay provisional tax. However, a company that does not
have a fixed establishment in New Zealand and is not treated as a resident in New
Zealand does not pay provisional tax (ITA s. RC 3).
have been applied or changed, and (b) description of the effect of any material
changes in accounting policies used since the previous income year. 24
Company law
200. The requirements under the Companies Act are the ones explained in
the 2011 Report. Section 194 of the Companies Act requires that the board of
a company ensure that accounting records are kept at all times that: (i) cor-
rectly record the transactions of the company; (ii) will enable the company to
ensure that the financial statements or group financial statements of the com-
pany comply with generally accepted accounting practice (if the company is
required to prepare such statements under this Act or any other enactment);
and (iii) will enable the financial statements or group financial statements
of the company to be readily and properly audited (if those statements are
required to be audited).
201. Large New Zealand companies must prepare financial statements
under sections 200 and 201 of the Companies Act. “Large” overseas com-
panies that have more than 25% overseas ownership are required to register
their financial statements with the Companies Office under section 207D.
202. Section 190 of the Companies Act requires that the board of direc-
tors of a company ensure that adequate measures exist to prevent the records
being falsified and detect any falsification of them. Failure to comply with
section 190 is an offence and, if convicted, a director can be liable to a fine of
up to NZD 10 000 (EUR 6 000) (s. 374).
24. Small companies are exempt from the minimum requirements. A company is
small in respect of an income year if both of the following apply: (a) the com-
pany is not part of a group of companies; and (b) the company has not derived
income in excess of NZD 30 000, and has not incurred expenditure in excess of
NZD 30 000, during the income year.
grounds to believe that the company, or one or more of its directors or share-
holders, has intentionally provided the Registrar with inaccurate information
(s. 313(1)). If a company has been removed from the register and has not been
liquidated there is no exception to the standard record keeping requirements
under the TAA (which is described further below). As a result, business and
other records set out in section 22 of the TAA must be retained for seven
years. Moreover, section 326 of the Companies Act provides that the removal
of a company from the New Zealand register does not affect the liability
of any former director or shareholder of the company or any other person
in respect of any act or omission that took place before the company was
removed from the register and that liability continues and may be enforced
as if the company had not been removed from the register. In relation to
accounting records, it is the board of a company which is accountable and
the failure to comply with these requirements is an offence committed by
every director (s. 194 of the Companies Act). As a result, the removal of a
company does not have any effect on director’s obligations to maintain com-
pany records.
205. Regardless of the reasons the company has been removed, an appli-
cation can be made for the company to be restored based on the following
reasons, among others: at the time the company was removed from the regis-
ter, (i) the company was carrying on business or a proper reason existed for
the company to continue in existence; (ii) the applicant was a creditor, or a
person who had an undischarged claim against the company; (iii) any other
reason it is just and equitable to restore the company to the New Zealand reg-
ister (s. 328 of the Companies Act). The restoration application can be made
by, among others, a creditor, a person who had an undischarged claim against
the company or, with the leave of the court, any other person (ss. 328 and 329
of the Companies Act). When a company is restored, the legal obligations
continue to apply to the companies as if the company had never ceased to
exist (s. 330). This would generally apply to the obligation to maintain books
and records, although even in the absence of restoration directors can be held
liable for the accounting records of the company.
206. The 2011 Report identifies a gap with respect to the requirements
to maintain accounting records and underlying documentation for liqui-
dated companies. The 2011 Report noted that, although the TAA and the
Companies Act require companies to maintain those records for a minimum
of seven years, the TAA contains an exception to the retention of records
requirements in case the company has been liquidated (s. 22(4)). Moreover,
the Companies Act provides that the liquidator appointed in relation to a
company is required to retain the accounts and records of the company for
a minimum of one year after the liquidation of the company (s. 256(1)(a)).
The Registrar of Companies may, however, require the liquidator to retain
the records for a longer period (s. 256 (1)(b)). However, this has not been the
Partnership Law
209. The LP Act obliges all limited partnerships to maintain accounting
records that correctly record and explain transactions and at any time enable
the financial position of the limited partnership to be determined for the last
seven completed accounting periods of the limited partnership (ss. 74 and
75). Moreover, effective as of 1 April 2014, the LP Act has been modified to
require the general partner of a limited partnership to prepare certain finan-
cial statements (ss. 75-75G).
210. Effective as of 1 April 2014, new accounting requirements were
introduced in relation to general partnerships that are considered large
partnerships 25. Section 34B of the Partnership Act 1908 requires that (i) the
25. Large partnerships are partnerships “in respect of an accounting period if at least
one of the following applies (combination of s. 34D of the Partnership Act and
s. 45 of the Financial Reporting Act 2013): (1) as at the balance date of each of the
2 preceding accounting periods, the total assets of the entity and its subsidiaries
partners of a large partnership must ensure that there are kept at all times
accounting records that (a) correctly record the transactions of the part-
nership; and (b) will enable the partnership to ensure that the financial
statements of the partnership comply with generally accepted accounting
practice; and (c) will enable the financial statements of the partnership to be
readily and properly audited (if those statements are required to be audited).
211. In addition, as noted in the 2011 Report (paras. 159 and 167), both
general partnerships and limited partnerships who supply goods or services
in New Zealand may be registered persons for purposes of the Goods and
Services Tax Act, and therefore the GST record-keeping requirements 26
would also apply directly to the partnership in these circumstances.
(if any) exceed NZD 60 million (EUR 36 million); (2) in each of the two preced-
ing accounting periods, the total revenue of the entity and its subsidiaries (if any)
exceeds NZD 30 million (EUR 18 million).
26. As noted in the 2011 Report, section 75 of the Goods and Services Tax Act (1985)
also imposes specific record-keeping requirements on a registered person (gener-
ally, a person who makes supplies of goods or services in New Zealand and who
is required to register under the Act) in respect of the goods or services that they
supply in New Zealand. Generally, the records required to be maintained pursu-
ant to section 75 of the Goods and Services Tax Act include (s. 75(2)): (i) a record
of all goods and services supplied by or to that registered person showing the
goods and services, and the suppliers or their agents, in sufficient detail to enable
the goods and services, the suppliers, or the agents to be readily identified by the
Commissioner, and all invoices, tax invoices, credit notes, and debit notes relating
thereto; and (ii) the charts and codes of account, the accounting instruction manu-
als, and the system and programme documentation which describes the accounting
system used in each taxable period in the supply of goods and services.
Trusts
214. Trusts have no legal personality. However, the record-keeping
requirements contained in Part III of the TAA and section 75 of the Goods
and Services Tax Act (explained above in relation to partnerships) apply to
the trustee(s) of a trust.
215. In relation to foreign trusts (trusts with non-resident settlors and a
resident trustee), there are particular requirements under section 22(7) (d) of
the TAA, that “records” includes a record of (i) the assets and liabilities of the
foreign trust; (ii) all entries from day to day of all sums of money received and
expended by the trustee in relation to the foreign trust and the matters in respect
of which the receipt and expenditure take place; and (iii) if the trust caries on a
business, the charts and codes of accounts, 27 the accounting instruction manuals,
and the system and programme documentation which describes the accounting
system used in each income year in the administration of that trust.
216. As noted under A.1.4, the main sanction for non-compliance with
22(7) (records to be kept) of the TAA is the knowledge offence in sec-
tion 143A. It applies if a resident trustee “knowingly” fails to disclose
information, or keep or provide records, as required by law. If a resident
foreign trustee has failed to comply with the disclosure and record keeping
requirements but was not aware of these rules, sanctions will not apply. As a
matter of practice, IR notifies the trustee of his or her tax responsibilities as
a trustee of a foreign trust (meaning a trust with a non-resident settlor), seeks
the required information disclosure and outlines the recordkeeping require-
ments. New Zealand is recommended to monitor that enforcement provisions
are effective to ensure the availability of information in all cases.
Inland Revenue
218. IR has approximately 800 investigators, 1000 debt collectors, and
almost 300 community compliance officers who form the majority of the
compliance staff working in the field. These staff are also closely supported
by almost 200 lawyers and legal support officers. There are comprehensive
registration and filing requirements, followed by educational efforts and
investigation and auditing work, as described under A.1.1 above.
219. The following table provides the number of companies, partnerships
and trusts registered as at 31 December in each of the years in the peer review
period.
Number of registered taxpayers per type of entity or arrangement
Companies Office
224. The oversight and enforcement efforts carried out by the Companies
Office are described in section A.1.
28. Only statistics relating to offences relevant to IR’s ability to obtain information
on request have been provided.
29. The FTR Act still covers real estate agents, the NZRB, lawyers and incorporated
firms, conveyancing practitioners and accountants.
conditions are met. This is not in line with the standard, which requires that
where third-party reliance is permitted, the ultimate responsibility for CDD
measures remains with the AML reporting entity relying on the third party. 30
As New Zealand has not issued a list or class of approved entities, the excep-
tion is not yet in effect. It is recommended that New Zealand ensure that its
Third Party Reliance regime is in line with the international standard before
any exceptions are granted.
236. Non-compliance with record keeping requirements under the AML/
CFT Act is subject to significant penalties as described under A.1.1.
237. A small gap is noted in respect of information relating to trusts.
The Anti-Money Laundering and Countering Financing of Terrorism
(Requirements and Compliance) Regulations 2011 allow reporting entities
to satisfy the requirement to identify the beneficiaries of the trust, if the
customer is a trust that is a discretionary trust or a charitable trust or that has
more than ten beneficiaries, by obtaining a description of each class or type
of beneficiary; and if the trust is a charitable trust, the objects of the trust
(s. 6(2)). It is noted as, detailed under A.1.4, pursuant to the AML supervisors’
Fact Sheet on Trusts, CDD obligations in relation to trusts would also include
the identification of (in addition to beneficiaries of trusts): (i) the beneficial
owner of the trust which may include trustees; and any other individual who
has effective control over the trust, specific trust property, or with the power
to amend the trust’s deeds, or remove or appoint trustees (such as a protector
or a special trustee or one or more of the beneficiaries of the trust); (ii) per-
sons acting on behalf of the trust (including persons who have authority to act
on behalf of the trust, such as trustees or other persons who are able to give
instructions about the trust’s assets).
238. The guidance on CDD of trusts issued by AML supervisors notes
that the trust structure should be verified using documents, data or informa-
tion issued by a reliable and independent source, and this may require the
provision of relevant extracts from a trust deed, subsequent deeds of appoint-
ment and amendment. It is not clear if that is required when the exception
provided under section 6(2) applies (i.e. regarding the identification of ben-
eficiaries of trusts).
239. The international standard requires that, for beneficiary(ies) of trusts
that are designated by characteristics or by class, financial institutions should
obtain sufficient information concerning the beneficiary to satisfy the finan-
cial institution that it will be able to establish the identity of the beneficiary
at the time of the pay-out or when the beneficiary intends to exercise vested
rights. 31 It is not clear that this will be the case in New Zealand, in particular
where beneficiaries have not been identified solely for the reason that there
are more than ten of them.
240. New Zealand explained that the decision to set a threshold for the
identification of beneficiaries to a trust is grounded in the different varie-
ties of trusts that exist in the New Zealand context. New Zealand advises
that trusts with more than ten beneficiaries in the New Zealand context are
rare and are most often “iwi trusts” which result from settlements of historic
disputes between New Zealand and its indigenous population under the New
Zealand founding document, the Treaty of Waitangi. As a treaty settlement
is intended to cover an entire iwi (or tribe), an iwi trust giving effect to that
settlement could have hundreds or thousands of named beneficiaries. For this
reason, a policy decision was taken to set a threshold to acknowledge that, for
some New Zealand trusts, it is impracticable to identify every named benefi-
ciary. New Zealand considers that this policy decision is consistent with its
risk profile and understanding of the types of trusts likely to have more than
ten beneficiaries.
241. New Zealand advises that all trusts are subject to enhanced due
diligence under the AML/CFT Act (section 22(1)(a)(i)), including iwi trusts
or any other trusts involving more than ten beneficiaries. This requires the
reporting entity to identify and take reasonable steps to verify not only the
beneficial owners of the trust, but also its purpose and source of funds (sec-
tions 23-24 of the AML/CFT Act). In order to understand who has effective
control or ownership of the trust per the AML/CFT Act’s definition of benefi-
cial owner (section 5), the reporting entity will need to understand the trust’s
structure, including who are the beneficiaries. In practice, banks satisfy this
requirement by obtaining and retaining a copy of the trust deed, among other
documentation. New Zealand thus considers that beneficiaries are identified
through the enhanced due diligence process.
242. New Zealand also notes that a copy of the trust deed (and all
amending deeds/functional equivalents) is provided to Inland Revenue on
registration of trusts having a non-resident settlor and a resident trustee.
Further, in relation to these trusts, trustees are required to provide details of
all fixed beneficiaries and details of discretionary beneficiaries/beneficiary
classes sufficient for the Commissioner to determine, when a distribution is
made under the trust, whether a person is a beneficiary.
243. New Zealand considers that the combination of these factors means
that any gap in the identification of beneficiaries under the AML/CFT Act is
theoretical or minor. New Zealand should monitor the use of trusts with more
than ten beneficiaries to ensure that the risk level remains low and review its
regime to bring it in line with the standard if the risk profile of iwi trusts or
any other trusts with more than ten beneficiaries changes.
244. As also noted under A.1.1, a few aspects of New Zealand’s obliga-
tions to identify beneficial ownership could be enhanced, as summarised
below:
• Some aspects of New Zealand’s framework are clarified by means
of guidelines, which are provided for AML obligated persons to
assist them in interpreting the AML/CFT Act and cannot be relied
on as evidence of complying with the requirements of that Act. New
Zealand considers that the guidance to AML obligated persons is
supported by engagement by supervisors with reporting entities (for
instance, on a one on one basis) to help them understand the various
scenarios in which beneficial ownership is exercised. New Zealand
should ensure that there is sufficient effective guidance to assist
reporting entities in interpreting the obligations under the AML/
CFT Act to identify the beneficial owners of customers in line with
the standard.
• If the AML obligated entity has not collected beneficial ownership
at the time of the client on boarding (or collected information under
a lower standard as per requirements under previous legislation),
there is no explicit requirement for the AML obligated entity to col-
lect beneficial ownership information as defined under the AML
Act in the course of on-going monitoring in all cases; however,
New Zealand supports that this is required and done in practice on
the basis of the paramount obligation to identify beneficial owners
provided under section 14(1) which applies to customers on-boarded
before and after the entry into force of the AML Act. New Zealand
should monitor on an on-going basis that beneficial ownership infor-
mation is available for all New Zealand incorporated companies
and all foreign companies that are resident for tax purposes in New
Zealand.
• Section 13 of the AML Act allows some flexibility in terms of
the documentation to verify the beneficial owner of a customer. It
provides that verification of identity must be done on the basis of
(i) documents, data, or information issued by a reliable and independ-
ent source; or (ii) any other basis applying to a specified situation,
customer, product, service, business relationship, or transaction
prescribed by regulations. New Zealand advised that there is enough
detail and flexibility in the AML Act and there was no need to issue
regulations to cover specific situations, customers, products etc.
As the Act does refer to the prescription of regulations, it remains
unclear the circumstances where AML reporting entities can rely on
other sources than a reliable and independent source. New Zealand is
recommended to clarify this aspect.
248. The 2011 Report found that New Zealand’s IR had broad powers
to access ownership, accounting, banking and other types of information
in order to respond to exchange of information requests and had adequate
powers to compel the production of such information. Moreover, there were
no statutory bank secrecy or other secrecy provisions in place that would
unduly restrict exchange of information. During the previous review period,
there were no instances where New Zealand did not provide information to its
EOI partners due to difficulties in obtaining requested information.
249. Since the 2011 Report, no significant changes have been made to
New Zealand’s access powers and they have continually proven to allow
timely and adequate access to all types of information requested by New
Zealand’s EOI partners.
250. In the current review period, New Zealand received 194 requests and
IR has not encountered any difficulties in obtaining information from various
sources in all but one case where there has been an application for judicial
review by the information holder. A final decision on this case is currently
pending.
32. The definition refers to (a) a thing that is used to hold, in or on the thing and
in any form, items of information; (b) an item of information held in or on a
thing referred to in (a); (c) a device associated with a thing referred to in (a) and
required for the expression, in any form, of an item of information held in or on
the thing (s. 3 of the TAA).
In practice
258. In practice, in order to collect any type of information or document,
IR advised that it will approach the source of information most likely to
hold the requested information. Generally, the competent authority will first
search IR’s internal systems before going externally, either to a government
authority (typically the business register), third-party information holders
(e.g. banks, tax agents, companies, individuals).
259. IR’s internal systems are an important source of information and
contain information collected from general disclosure requirements as well
as domestic inquiries already carried out (e.g. an audit of a taxpayer). Before
making external inquiries that may potentially alert the subject of an EOI
264. IR also has the powers to conduct an audit to solely collect informa-
tion for purposes of EOI. There are no legal or procedural limitations on how
a person may be audited or the number of times they may be audited that
would limit the ability of the New Zealand competent authority or field staff
to use their access powers for the purpose of EOI requests.
33. Under the FR Act, an overseas company is large if either of the following applies:
• as at the balance date of each of the two preceding accounting periods, the
total assets of the entity and its subsidiaries (if any) exceed NZD 20 million
• in each of the two preceding accounting periods, the total revenue of the
entity and its subsidiaries (if any) exceeds NZD 10 million.
be produced for the Commissioner. The failure to comply with a court order
wilfully and without lawful excuse is an offence resulting in penalties include
imprisonment for up to three months or a fine not exceeding NZD 1 000
(EUR 600) (s. 143G of TAA and s. 212 of the District Court Act 2016).
Professional secrecy
281. As noted in the 2011 Report, among the situations in which New
Zealand is not obliged to supply information in response to a request is when
the requested information would disclose confidential communications pro-
tected by attorney-client privilege (as described in section 20 of the TAA).
282. As also noted in the 2011 Report, the TAA also provides a statutory
right enabling taxpayers to claim non-disclosure for certain tax advice con-
tained in documents prepared by tax advisors (ss. 20B to 20G of the TAA).
The statutory right also extends to certain documents created by taxpayers
for the purpose of seeking tax advice from tax advisors. The right does not
apply to tax contextual information (s. 20F).
283. Generally, IR seeks tax contextual information in order to establish
the facts relating to a transaction or series of transactions (though information
demands may relate to wider matters) including relevant information such
as whether the transaction took place, who were the parties, the purpose of
the transaction, relevant dates, amounts, conditions, formulae, etc. In prac-
tice, it is worth noting that IR officers are generally not concerned with the
substance of tax advice contained in tax advice documents, but rather with
relevant facts which relate to a taxpayer’s tax position. Those facts can be
ascertained by means of reviewing the tax contextual information which is
required to be provided on request.
284. During the previous and the current review period, legal professional
privilege and tax advice non-disclosure right were not an impediment to
obtaining information to respond to an EOI request. No issues were raised
by peers either.
285. The 2011 Report found that there were no issues regarding rights and
safeguards applicable to persons in New Zealand. The element was deter-
mined to be in place and rated Compliant.
286. The 2016 ToR have introduced a new requirement in circumstances
where an exception to notification has been granted – in those cases there
must also be an exception from time-specific post-notification. As New
Zealand law does not require the person who is the subject of a request for
information to be notified, the changes made to the ToR do not have an
impact in New Zealand. Under New Zealand law, there is no appeal right of
the person who is the subject of a request for information or of the person
who holds the information. Notwithstanding the above, persons affected by
an information request are not prevented from seeking judicial review of the
Commissioner’s decision to utilise her powers to gather and exchange infor-
mation. During the review period, rights and safeguards in New Zealand
have not unduly delayed or prevented exchange of information. In one case
the information holder has sought judicial review. The case is still subject to
appeal by the Commissioner and is referenced in sections B.2, C.1 and C.3
of this report.
287. The new table of determinations and ratings is as follows:
period, there have been two other judicial review cases Squibb (see sec-
tion C.3) and Avowal (see section B.1) which confirmed the adequacy of New
Zealand’s powers of access to information to reply to EOI requests.
Chatfield litigation
293. In terms of background to this case, IR issued notices for the produc-
tion of information to Chatfield, the registered tax agent of the companies
that were subjects of an EOI request. Chatfield resisted compliance with
the notices, querying the basis on which the Commissioner had issued the
notices. Chatfield’s various claims were rejected by the Commissioner.
On 13 May 2015, Chatfield commenced an application for review of the
Commissioner’s decision to issue the s. 17 notices under the Judicature
Amendment Act 1972. Chatfield’s application for review was on two princi-
pal grounds:
a. That the Commissioner’s actions in the present case were inconsist-
ent with IR’s Operational Statement 13/02, which is intended to
offer guidance on the exercise of the Commissioner’s power under
section 17. Chatfield said the Commissioner’s actions were incon-
sistent with the statement, and were issued in breach of Chatfield’s
legitimate expectation and were invalid.
b. That in issuing the section 17 notices the Commissioner failed to
take into account relevant considerations, namely :
1. the terms of IR’s Operational Statement 13/02;
2. the “limited nature of the tax agent/client relationship”; and
3. the DTA and, in particular, the terms of article 25. 35
294. By judgment dated 27 September 2016 (Chatfield & Co Ltd v
Commissioner of IR [2016] NZHC 2289), the High Court struck out
Chatfield’s first cause of action and the first two particulars of the second
cause of action on the basis that they were not reasonably arguable. This left
as the sole remaining cause of action the contention that the Commissioner
failed to consider the terms of the DTA in the decision to issue the section 17
notices. In relation to this point, Chatfield alleged that the Commissioner
erred in law in issuing the notices, and broadly, that she: (a) failed to fully
and/or accurately evaluate the EOI request and its consequences; (b) had
insufficient information to accurately assess the lawfulness of the request;
(c) purported to make an exchange of information decision where the relevant
decision-maker was not a competent authority as defined in article 3(1)(i) of
35. Article 25 of New Zealand’s DTA with the requesting jurisdiction is the equiva-
lent of article 26 of the OECD Model Convention.
the DTC; (d) did not take into account the terms of the DTC, and in particu-
lar, articles 2 and 25, various provisions in the Tax Administration Act, and
the limitation period for tax investigations in the treaty partner; (e) failed
to take into account that some of the information sought is available in the
ordinary course of administration in the treaty partner; (f) failed to take into
account the need for the NTS to exhaust all local remedies; and (g) failed to
appreciate that some of the taxes in respect of which information is sought,
may not be covered by the DTA. Chatfield alleges that the notices were
issued pursuant to mistakes of fact, that the Commissioner failed to apply
independent judgment or independently exercise her discretion in issuing the
notices, and that the decision to issue the notices was one that no reasonable
Commissioner could properly make. The Commissioner denies that she had
erred in law in any of those respects.
295. On 22 December 2017, a decision was made by the High Court of
New Zealand (Chatfield & Co Ltd v the Commissioner of IR [2017] NZHC
3289). In summary, the court concluded that the New Zealand competent
authority did not present to the court evidence as to how he had satisfied him-
self that it would be lawful for IR to respond to the EOI requests. As such, the
judge considered that the Commissioner’s decision to issue the s. 17 notices
against Chatfield was invalid, and made an order quashing the s. 17 notices.
296. In the judgement, the court clearly established that the Commis
sioner’s decision to issue the s. 17 notices is a decision susceptible to judicial
review:
Administrative decisions, including decisions made by the
Commissioner or her delegates, must be made in accordance with
the law. As I have already noted, this case involves a relatively
straightforward analysis of the provisions of the DTA – which
is part of domestic law – and s. 17 of the Tax Administration
Act. The power to make the decision to invoke the s. 17 power
is conferred by the legislation onto the Commissioner, and the
Commissioner, when exercising that power, must exercise it
properly, and in accordance with the law. There is no need for
deference to the Commissioner as the decision-maker when
inquiring what either the Tax Administration Act, or the DTA,
require. Review in this context can and should be hard-edged,
and a “correctness standard” should apply.
297. The judge’s decision noted relevant background papers, in particular
the EOI request, file notes that the New Zealand competent authority may have
made, and any correspondence between New Zealand’s competent authority
and the EOI partner regarding the request, had not been disclosed to the Court.
Therefore, it was difficult for the court to fully assess the measures that had
been taken by the competent authority to assess the validity of the request.
301. The 2011 Report concluded that New Zealand’s network of EOI
mechanisms was “in place” and was rated Compliant. At that time, New
Zealand had 37 Double Tax Conventions (DTCs) and New Zealand had an
emerging network of 18 TIEAs. Apart from a few exceptions, the exchange
of information articles of New Zealand’s DTCs generally followed Article 26
of the OECD Model Taxation Convention wording that prevailed at the time
each DTC was entered into. Moreover, New Zealand’s closely follows the
OECD Model TIEA for most of its TIEAs.
302. Three DTCs (with Japan, Malaysia and Switzerland) and one TIEA
(with Bermuda) were identified in the text of the 2011 Report as containing
wording that was not in accordance with the standard. The Report also noted
that whilst New Zealand did not require provisions akin to Article 26(4) and
(5) of OECD Model Taxation Convention to exchange information in line
with the standard, some limitations may exist in the domestic laws of some
of its treaty partners. In-text recommendations were therefore given for New
Zealand to continue to renegotiate its older DTCs to included provisions
similar to Article 26(4) and (5) where necessary. Finally, an in-text recom-
mendation was given to New Zealand to continue to bring EOI agreements
into force expeditiously.
303. Since the last review, New Zealand has made significant progress in
updating the EOI provision in its old DTCs and in entering into new EOI instru-
ments. Nine new bilateral EOI instruments were signed including new DTCs,
protocols to DTCs and TIEAs. Moreover, on 26 October 2012, New Zealand
signed the Multilateral Convention on Mutual Administrative Assistance
(Multilateral Convention), as amended, and ratified it on 21 November 2013
and it entered into force on 1 March 2014. As a result, all EOI relationships
entered by New Zealand are currently in line with the standard.
304. New Zealand has also made great progress in bringing EOI instru-
ments into force. However, there have been considerable delays in bringing
into force some TIEAs. Although the problem seems to have been addressed
now, the in-text recommendation for New Zealand to continue to bring EOI
agreements into force expeditiously is retained. New Zealand’s interpreta-
tion of “foreseeable relevance” is in line with the standard and its approach
is to allow exchange of information to the widest extent possible. No peers
have raised issues regarding the New Zealand’s application of the foreseeable
relevance standard.
305. The EOIR standard now includes a reference to group requests in line
with paragraph 5.2 of the Commentary to Article 26 of the OECD Model Tax
Convention. In addition, the foreseeable relevance of a group request should
be sufficiently demonstrated, and that the requested information would assist
in determining compliance by the taxpayers in the group. New Zealand has
never received group requests but advised that it is in a positon to process
such requests. Neither New Zealand’s EOI instruments nor its domestic laws
exclude the possibility for making and responding to group requests.
306. The new table of determinations and ratings is as follows:
308. The 2011 Report noted that New Zealand’s DTCs with Japan (1963),
Malaysia (1976), and Switzerland (1980) incorporated additional language
that limited the exchange of information article to information at the par-
ties’ disposal under taxation laws, not covering information at their disposal
under other laws, and it limited the exchange of information to informa-
tion which is at their disposal in the normal course of administration. The
2011 Report noted, however, that in practice this wording did not limit New
Zealand’s ability to respond to a request from these jurisdictions. Since then,
New Zealand entered into a new DTC with Japan and a protocol to DTC
with Malaysia, bringing their EOI relationships in line with the standard.
Moreover, New Zealand can exchange information in line with the stand-
ard under the Multilateral Convention with all the three jurisdictions as the
Convention is in force in all of them.
309. New Zealand’s. 1976 DTC with Fiji is limited to exchanging infor-
mation for the purposes of the DTA “or for the prevention of fraud or for the
administration of statutory provisions against the avoidance of taxes”. New
Zealand advises that this DTC is currently under renegotiation. Moreover,
New Zealand interprets the scope of this provision as being wide enough to
allow for EOI up to the “foreseeably relevant” standard.
310. The 2011 Report also concluded that all but one of New Zealand’s
TIEAs met the foreseeably relevant standard. New Zealand’s TIEA with
Bermuda contained additional language that may limit the scope of infor-
mation that may be exchanged. Notwithstanding the above, New Zealand
and Bermuda can exchange information in line with the standard under the
Multilateral Convention.
311. New Zealand continues to interpret and apply its DTCs and TIEAs
consistent with the international standard. All of the nine new EOI arrange-
ments which New Zealand has signed since the 2011 Report included the
term “foreseeably relevant” in their EOI Article. Those are the DTCs with
Canada, Japan, Papua New Guinea, Samoa and Viet Nam; protocols to DTC
with India and Malaysia; and TIEAs with Niue and San Marino.
312. Interpretation of DTCs and the impact of the OECD Commentary
have been discussed in some judicial decisions in New Zealand. Justice
Ellis in Chatfield & Co Ltd v The Commissioner of IR 36 discussed the cor-
rect interpretation of DTCs. In her judgment, Ellis J confirms the relevance
of the OECD Commentary in interpreting DTCs, particularly that the later
commentaries are intended by member states to be used in interpreting and
applying DTCs concluded before their adoption, except where the commen-
taries relate to areas in which substantive changes have been made to the
Model Convention itself. The issue related to the Korean DTC, which in its
36. Chatfield & Co Ltd v The Commissioner of Inland Revenue [2015] NZHC 2099.
EOI article (article 25), does not include the words “or the oversight of the
above” in paragraph 1. Justice Ellis considered the effect of the commentaries
is that the Korean DTC should be read as if those words are included.
313. A decision in Chatfield (Chatfield & Co Ltd v the Commissioner
of IR [2017] NZHC 3289) also provides some context on how New Zealand
court viewed the interpretation of the term “necessary” used in EOI article
of the Korean DTC. According to the decision, the term “necessary” would
require New Zealand’s competent authority to “satisfy himself, by clear and
specific evidence, that all of the information requested” by the EOI partner
“was needed or required in relation to an investigation into, or other action
being taken” by the EOI partner against a domestic taxpayer, and that,
among others, the EOI partner had been unable to obtain the information in
its jurisdiction. The standard requires that New Zealand is able to reply to
requests where the requesting jurisdiction has pursued all means available
in their territory to obtain the information, except those that would give rise
to disproportionate difficulties. New Zealand advised that it plans to appeal
the Chatfield decision. Moreover, New Zealand considers that the decision is
unlikely to be used as precedent due to the specific facts and circumstances
relating to the particular EOI request. New Zealand also advises that the out-
come of the case will be considered carefully and appropriate action will be
taken to ensure that it does not have a negative impact on effective exchange
of information.
314. From a practical perspective, New Zealand advises that it requires
that the requesting jurisdiction provide sufficient information to demonstrate
the foreseeable relevance of their request. New Zealand approaches inbound
requests on a holistic basis, evaluating the request as a whole. Its approach is
to allow exchange of information to the widest extent possible. New Zealand
does not require any particular information to be provided by the requesting
jurisdiction in determining whether the foreseeably relevant standard applies
and as such does not provide a template for the formulation of such requests.
If the information provided is insufficient, then, depending on the circum-
stances, New Zealand advises that it will contact the requesting competent
authority to discuss the request and seek to address any concerns.
315. Peer input did not raise any concerns regarding New Zealand’s inter-
pretation of the foreseeable relevance standard.
Group requests
316. The EOIR standard now includes a reference to group requests in
line with paragraph 5.2 of the Commentary. Neither New Zealand’s EOI
instruments nor its domestic laws exclude the possibility for making and
responding to group requests. New Zealand’s competent authority advised
that it is in a position to process group requests. New Zealand considers that
37. This is currently the case of the DTCs entered with Austria, Belgium, Chile,
Denmark, Fiji, Finland, France, Germany, Indonesia, Ireland, Italy, Korea, the
Netherlands, Norway, the Philippines, Russia, South Africa, Spain, Sweden,
Switzerland, Chinese Taipei, Thailand and the United Arab Emirates. New
Zealand can also exchange information under the Multilateral Convention
with Austria, Belgium, Chile, Denmark, Finland, France, Germany, Indonesia,
Ireland, Italy, Korea, the Netherlands, Norway, the Philippines (once in force
in the Philippines), Russia, South Africa, Spain, Sweden, Switzerland and the
United Arab Emirates (once in force in the United Arab Emirates).
38. Three jurisdictions (Fiji, Chinese Taipei and Thailand) have not yet been reviewed
by the Global Forum and whether they require a provision akin to Article 26(5) of
the OECD Model Taxation Convention to exchange information in line with the
standard is not known. The DTC between New Zealand and Fiji is currently under
renegotiation.
39. This is currently the case of the DTCs entered with Belgium, Chile, Denmark, Fiji,
Finland, France, Germany, Indonesia, Ireland, Italy, Korea, the Netherlands, Norway,
the Philippines, Russia, South Africa, Spain, Sweden, Switzerland, Chinese Taipei,
Thailand and the United Arab Emirates. New Zealand can also exchange information
under the Multilateral Convention with Belgium, Chile, Denmark, Finland, France,
Germany, Indonesia, Ireland, Italy, Korea, the Netherlands, Norway, the Philippines
(once in force in the Philippines), Russia, South Africa, Spain, Sweden, Switzerland
and the United Arab Emirates (once in force in the United Arab Emirates).
40. Three jurisdictions (Fiji, Chinese Taipei and Thailand) have not yet been
reviewed by the Global Forum and whether they require a provision akin to
Article 26(4) of the OECD Model Taxation Convention to exchange information
in line with the standard is not known. The DTC between New Zealand and Fiji
is currently under renegotiation.
• The Select Committee considers the treaty and the national inter-
est analysis and reports back to the House. The report must note
whether it has identified any matters to be drawn to the attention of
the House.
• Parliament cannot veto the treaty. However, any adverse comments
or recommendations must be considered by Cabinet, and a decision
made whether to progress the treaty. In practice, it is very rare that
Parliament raises concerns on EOI instruments.
• The next step is to incorporate the tax treaty into New Zealand
domestic law by Order in Council. This requires a submission to
Cabinet, seeking their approval for the referral of a draft Order to the
Executive Council, for signature by the Governor-General.
• Once the Governor-General has made the Order, it is published in the
New Zealand Gazette. As a rule, there is then a 28 day waiting period
before the Order enters into force.
• The entry into force of the Order in Council completes New Zealand’s
domestic procedures for entry into force of the treaty. The require-
ments of the Entry into Force Article of the treaty then apply.
Generally this requires an exchange of diplomatic notes confirming
the conclusion of all domestic procedures, with the treaty entering
force on the date of the last note.
329. The 2011 Report noted that the ratification of some of New Zealand
agreements that were signed in 2009/2010 was taking longer than usual due
to a significant number of agreements that were signed around that time.
While the 2011 Report noted that the timeframe was not of concern at the
time, it was nonetheless recommended that New Zealand continue to bring
agreements into force expeditiously.
330. New Zealand explains that on average its domestic procedures to
bring EOI instruments into force take approximately six months. There are
circumstances which may cause delays such as when the EOI instrument
needs to be signed in different languages. In addition, some delays were
observed in relation to the ratification of TIEAs as during some years the
position of High Commissioner of New Zealand for the region was vacant
or occupied in conjunction with other regions, causing delays in the com-
pletion of the entry into force process. As a result the ratification of some
EOI instruments have taken more than two years (TIEAs with Anguilla,
Bahamas, Bermuda, British Virgin Islands and Dominica and the DTC with
South Africa) Moreover, the TIEA with Saint Kitts and Nevis was signed in
2010/2011 and New Zealand still needs to complete the domestic processes
to bring it into force. It is noted that New Zealand can also exchange infor-
mation with Saint Kitts and Nevis under the Multilateral Convention. New
*Two EOI instruments (the DTCs with Switzerland and TIEA with Bermuda) contain language
that is not in line with the standard. However, New Zealand and these jurisdictions can also
exchange information under the Multilateral Convention which allows EOI to the standard.
334. The 2011 Report noted that New Zealand had a very active treaty
negotiation programme and that its network of EOI instruments covered
all relevant partners, meaning all those partners who were interested in
entering into an EOI instrument with New Zealand. Element C.2 was rated
“Compliant”.
335. Since that review, New Zealand has continued to expand its EOI
network. Notably, it signed the Multilateral Convention on 26 October 2012
and ratified it on 21 November 2013. The Multilateral Convention entered
into force on 1 March 2014 with respect to New Zealand. New Zealand has
also signed five new DTCs (with Canada, Japan, Papua New Guinea, Samoa
and Viet Nam), two TIEAs (with Niue and San Marino), and two protocols to
DTCs (with India and Malaysia).
336. Comments were sought from Global Forum members in the prepa-
ration of this report and no jurisdiction advised that New Zealand refused
to negotiate or sign an EOI instrument with it. As the standard ultimately
requires that jurisdictions establish an EOI relationship up to the standard
with all partners who are interested in entering into such relationship, New
Zealand should continue to conclude EOI agreements with any new relevant
partner who would so require.
337. New Zealand currently has eight DTC and four TIEA negotiations
on-going.
338. The new table of determinations and ratings is as follows:
C.3. Confidentiality
The jurisdiction’s information exchange mechanisms should have adequate
provisions to ensure the confidentiality of information received.
339. The 2011 Report concluded that the applicable treaty provisions and
statutory rules that apply to officials with access to treaty information and the
practice in New Zealand regarding confidentiality were in accordance with
the standard. No issues in practice were found.
340. There have been no changes in the legal framework and practice
since the 2011 Report. A recent court case confirmed that an EOI request
would not need to be disclosed to the information holder in the course of the
judicial review proceeding and the treaty confidentiality provisions remain
paramount (Chatfield & Co Ltd v Commissioner of IR [2016] NZHC 1234).
341. The new table of determinations and ratings is as follows:
except when it is necessary to do so for the purpose of carrying into effect the
IR Acts and other associated acts. According to New Zealand, the purpose of
section 81(3) is to reinforce IR’s tax secrecy obligations by creating a privi-
lege in respect of tax secret information.
347. However, where IR conducts any litigation in the exercise of its func-
tions, powers or duties then that is both “necessary” and for the purpose of
“carrying into effect” the IR Acts. As a litigant, section 81(3) does not protect
IR from being subject to ordinary rules relating to discovery and the produc-
tion of documents for inspection.
348. Section 81(4) of the TAA provides a number of specific exceptions
to the secrecy rule imposed by section 81(1) that authorises IR to disclose
taxpayer information in specific situations. 41
349. The confidentiality of communications between jurisdictions
including the EOI request was recently discussed by the High Court in New
Zealand in Chatfield & Co Ltd v Commissioner of IR [2016] NZHC 1234.
Here, the issue for the High Court was whether it should order discovery of
material exchanged pursuant to the DTA between New Zealand and a treaty
partner. The Court considered that generally, this question is governed by
section 81 of the TAA. 42 The Court considered it was faced with competing
section 81 obligations, being that:
• compliance with the Commissioner’s discovery obligations in the
course of defending court proceedings against her involves carrying
into effect the IR Acts and
• maintaining a properly founded duty of confidence (whether owed
to a taxpayer or to a foreign state) also involves the pursuit of such a
purpose.
350. The court considered that the integrity of the tax system depends
both upon taxpayers not being unfairly disadvantaged when litigating against
41. Most of them are irrelevant in the context of EOI, except section 81(4)(k) which
authorises the Commissioner “communicating any information to any author-
ised officer of the Government of any country or territory outside New Zealand
where the application of a provision of any of the Inland Revenue Acts affecting
the incidence of tax or duty is expressed to be conditional on the existence of a
reciprocal law or concession in any such country or territory, or where under a
provision in any of the Inland Revenue Acts a reciprocal arrangement has been
made with the Government of any such country or territory affecting the inci-
dence of tax or duty”.
42. This was based on the Supreme Court’s decision in Westpac Banking
Corporation Ltd v Commissioner of Inland Revenue [2008] NZSC 24, [2008]
NZLR 709.
Confidentiality in practice
353. The 2011 Report noted that New Zealand has internal administrative
guidelines regarding confidentiality of information exchanged. In addition,
New Zealand’s competent authority used encrypted e-mail in exchanging
information to tax treaty partners wherever possible. Only International
Audit Unit staff involved in exchange of information work had access to the
exchange of information database of cases.
354. This review finds that New Zealand has a comprehensive set of
policies and practices to ensure confidentiality of the EOI request and all
information exchanged.
43. Chatfield & Co Ltd v Commissioner of Inland Revenue [2016] NZHC 1234, at
[22].
44. Chatfield & Co Ltd v Commissioner of Inland Revenue [2016] NZCA 614.
45. Chatfield & Co Ltd v Commissioner of Inland Revenue [2017] NZSC 48.
Training
360. A number of IR’s online learning modules educate officers on infor-
mation confidentiality policies, expectations and rules.
361. The EOI Team receives, in addition to on-the-job training, training
on internal processing of requests and confidentiality requirements.
Physical security
362. Various policies and practices ensure physical security over confi-
dential information. IR has a dedicated corporate security team and has also
issued guidelines on visitor management, security of keys and the use of
personal recognition systems (identity cards).
363. IR has a data classification policy which requires all information
and documents be labelled with its classification and handled in a specific
manner. Exchange data is classified as “IN CONFIDENCE” (information
that could prejudice law and order, impede government business and/or affect
citizens privacy) and is labelled as such. Data is only released in specified
circumstances to officers with a need to use it.
364. The EOI Team closely manages the receipt, storage and disposal of
hard copy exchange information. Furthermore, the EOI Team has imple-
mented the following principles:
• All of the information received by the EOI Team is confidential
and should be stored securely. The EOI Team’s files must be stored
in either the secure storage room or the locked cabinets, and only
retrieved when they are being worked on. Inactive physical records
are held in a secure offsite storage facility.
• Access to passwords and keys is restricted to staff working in the
EOI Team.
• Only the EOI Team should have access to the EOI Register and elec-
tronic folders that the EOI register and soft copy folders sit in.
• Hard copies of incoming information should only be made by the
EOI Team if strictly necessary. Any hard copies should be disposed
of in a secure manner when no longer needed.
• Members of the public are restricted from entering in the EOI Team’s
office area.
• A clear desk policy is enforced.
Electronic Security
367. Secure encrypted e-mail is used for communication within the New
Zealand government. In addition, IR implemented a tool which detects and
alerts IR staff where their email contains information that may be in breach
of the IR Code of Conduct, or legislative secrecy requirements.
369. IR reports each year in its annual report on the number and type of
privacy breaches that have been recorded, including those that involve disclo-
sure of personal information. 46
370. In particular with regard to EOI, there have been no known breaches
in relation to EOI requests received by New Zealand or information related
to such requests.
372. The 2011 Report concluded that New Zealand’s information exchange
mechanisms allow the parties to decline to supply information which would
disclose any trade, business, industrial, commercial or professional secret or
trade process, or information the disclosure of which would be contrary to
public policy (ordre public). The new EOI mechanisms entered into by New
Zealand contain the same provisions. In practice, during the current review
period New Zealand authorities confirmed that they did not experience any
practical difficulties in responding to EOI requests due to the application of
rights and safeguards in New Zealand.
373. The new table of determinations and ratings is as follows:
In practice
379. To date, New Zealand has not experienced any practical difficulties
in responding to EOI requests due to the application of rights and safeguards.
It is open for a New Zealand person asked to supply information to satisfy a
request from a treaty partner to object to that information being exchanged
on the basis of trade or secrecy grounds. However, the information must still
be supplied to IR in the first place. Once the information has been supplied,
it is then up to the New Zealand competent authority, taking into account the
objections made, to determine whether to exchange the information.
384. New Zealand advised that it also tries to reciprocate the assistance
it receives from peers by sharing information spontaneously with its EOI
partners. IR officers are encouraged to share findings with the EOI Team that
may be foreseeably relevant to other jurisdictions. Generally, spontaneous
exchanges of information relate to specific tax evasion risks. Within the peer
review period, information was spontaneously exchanged with treaty partners
on 164 distinct occasions (88 in 2014, 38 in 2015, and 38 in 2016).
385. New Zealand also actively engaged with assistance in collection
with treaty partners. It engaged in 2 such cases in 2014; 50 in 2015 and 49 in
2016. New Zealand exchanges withholding tax data from interest, dividend
and royalty income with 39 jurisdictions as part of its automatic exchange of
information programme. New Zealand has exchanged FATCA data annually
with the United States since September 2015. It commenced exchanging land
information automatically with treaty partners in 2016 and will be exchang-
ing foreign trust information automatically in 2018 to treaty partners that
express an interest in receiving such details and can demonstrate foresee-
able relevance. New Zealand will start exchanging financial information
automatically under the Common Reporting Standard in 2018.
386. The new table of determinations and ratings is as follows:
partners include the United Kingdom, and the United States, reflecting the
trade, investments and/or migration of individuals.
389. For years 2014 to 2016, the number of requests where New Zealand
answered within 90 days, 180 days, one year or more than one year, are tabu-
lated below (as at 2 October 2017).
390. New Zealand explained that requests that are not fully dealt with
within the 90 days do not typically relate to a particular type of information
(e.g. bank information, accounting information). As a rule, requests that take
longer than 90 days to be replied to involve contacting third party informa-
tion holders in particular in relation to voluminous or complex requests;
although in many circumstances New Zealand can still reply to these requests
within the 90-day timeframe. Another circumstance where requests may not
be fulfilled within 90 days are situations where New Zealand’s competent
authority is required to seek clarification from the requesting competent
authority in order to action the request and the requesting competent author-
ity takes some time to reply to the clarification request.
391. With respect to the three requests that have taken more than one year
to be replied to, the following circumstances have arisen:
• The record keeping requirements for certain information had elapsed
and the information was no longer available or
• New Zealand had replied to all questions from the treaty partner a
couple of days after the receipt of the request. However, the request
also raised some New Zealand domestic risks which could also have
been relevant to the requesting jurisdiction’s audit. In light of this, the
status of EOI requests was left as active.
392. The one pending request is related to the on-going Chatfield litiga-
tion, described under elements B.1, B.2 and C.3 above. The information
yet to be provided to the requesting authorities includes copies of financial
statements, agreements for sale and purchase, settlement statements relating
to property sales, share transfer documents, bank remittance certificates for
share and property sales, and the reasons for the change in ownership of cer-
tain properties in relation to 15 corporate entities in New Zealand. 47 A partial
reply with information that was available within IR and other government
authorities has been sent to the treaty partner.
393. With respect to the five requests withdrawn by the requesting juris-
dictions, the following details have been provided by New Zealand:
• Three of those cases referred to requests for banking information and
New Zealand would need to seek the requested information from banks
in New Zealand. In those cases, the requesting competent authority
advised that it did not want to risk the taxpayer finding out that there
was an investigation and it requested that the bank not to be contacted
for information and withdrew the request. As noted under element B.2
and C.3, there are no notification requirements in New Zealand and
New Zealand is not required to include information about the request
on the notice sent to the information holder. However, as there are no
anti-tipping off provisions, banks are not prohibited from informing
accountholders that information about them has been provided to IR.
• I n relation to one request that also related to banking information,
New Zealand considered that, based on the background information
provided, the request should have been focused on a different entity
than the one referred to in the request. New Zealand provided advice
on which entity within the structure the partner should focus on to get
the desired outcome. The treaty partner appreciated the advice and
agreed with New Zealand. The partner withdrew the initial request
and subsequently (in 2017) sent a new request for the other entity.
• In relation to one request received at the beginning of the review
period, New Zealand files noted that the previous EOI manager in
New Zealand had a phone discussion with the requesting jurisdiction
47. Chatfield & Co Limited v Commissioner of Inland Revenue [2016] NZCA 614,
at [5].
Status updates
396. During the review period, New Zealand sent status updates in approxi-
mately 70% of the cases where requests could not be replied within 90 days.
New Zealand explained that it did not always send a status updates where a
response was going to be provided just after the 90-day time frame (within for
instance 100 days from the date of the request). Most peers that did not receive
updates on the status of the requests noted having received interim replies or
that there were on-going consultations. Since July 2016, New Zealand has taken
steps to ensure that status updates are provided invariably within 90 days when
a request has not been responded. This involved enhancing its EOI register
in September 2017, which now includes reminders for status updates. New
Zealand is recommended to monitor that it systematically provides an update
or status report to its EOI partners in situations when the competent authority
is unable to provide a substantive response within 90 days.
EOI organisation
397. New Zealand’s competent authorities relevant to the EOI mechanisms
are:
• Manager, International Revenue Strategy (Principal competent
authority)
• Strategy and Intelligence Manager, International Revenue Strategy
(Principal competent authority)
• Two senior advisors, International Revenue Strategy (Competent
authority contacts for matters pertaining to exchange of information
generally).
398. The EOI Team also encompasses an additional senior advisor and an
advisor. New Zealand advises that it has flexibility to obtain further human
resources, if needed.
399. New Zealand provides updated lists of competent authorities to all
treaty and EOI partners. Additionally, New Zealand keeps its competent
authority details up to date in the OECD’s list of competent authorities. New
Zealand has frequent telephone and encrypted email contact and at least one
annual face-to-face meeting with the competent authority of its main EOI
partner, Australia. Regular exchange of emails and telephone calls are also
maintained with other treaty partners to discuss on-going cases.
400. All exchanges of information are managed centrally by the EOI
Team. A central email mailbox is used. Due to the small size of the team, the
capacity of each individual member can be closely monitored by the Strategy
and Intelligence Manager. Team meetings are held monthly.
Training
401. Each individual member is able to receive specialist one-on-one
training with the Manager, International Revenue Strategy. An EOI manual
is also available as well as various resources on IR’s intranet. Members of
the EOI Team also participate in Global Forum training events and seminars.
EOI process
404. Requests are assigned by the Strategy and Intelligence Manager to
one of the senior advisor (EOI officers) in the EOI Team. On being assigned a
request, the EOI officer will have primary responsibility for the case; however
the manager also monitors that requests are actioned. A final check of every
EOI correspondence is completed either by one of the EOI Team’s managers.
405. The EOI officer assigned to the case will verify the validity of
the request, in consultation with the Strategy and Intelligence Manager on
receipt. If the information provided is insufficient to process the case, then,
New Zealand’s competent authority will contact the requesting competent
authority to discuss the request and seek to address any concerns regarding
the request. Where a request is considered to be invalid or incomplete, the
requesting jurisdiction will be notified of the deficiency within 60 days of
receipt of the request. If the request is incomplete in part, the case will be
worked to provide information for the part of the request that is valid. In
terms of timeliness, the EOI Team endeavours to action all non-complex
requests within two months and all complex requests within the maximum
period of six months, and manages to achieve this standard in the great
majority of cases. Priority is given to urgent requests received.
Outgoing requests
411. All outbound EOI requests are managed through the EOI Team. The
process is as set out in the EOI manual. In summary, the EOI officer assigned
to the potential request discusses the file with the tax auditor/IR officer
seeking to make the request. Before the request is drafted by the tax auditor/
IR officer, the EOI officer assesses foreseeable relevance of the information
being sought. The EOI officer checks the completeness of the request in
accordance with the checklist provided in the EOI manual and reviews and
amends where necessary. One of the two managers of the EOI Team always
conducts a final check of the outgoing requests before they are sent.
412. New Zealand’s competent authorities accommodate any jurisdic-
tion’s requirements to have information requested according to a particular
template (all of which are located on the IR’s intranet site).
413. During the review period, New Zealand sent a total of 466 requests
to its EOI partners
Providing feedback
416. The EOI Team reports that it always provide feedback on the use
and usefulness of a response received to an outbound request, in addition to
a thank-you letter. The EOI officer in charge will maintain regular contact
with the IR officer using the requested information to ensure that it is used
appropriately and that feedback can be provided to the responding jurisdic-
tion once the information has been fully utilised.
The assessment team or the PRG may identify issues that have not had
and are unlikely in the current circumstances to have more than a negligible
impact on EOIR in practice. Nevertheless, there may be a concern that the
circumstances may change and the relevance of the issue may increase. In
these cases, a recommendation may be made; however, such recommenda-
tions should not be placed in the same box as more substantive recommen-
dations. Rather, these recommendations can be mentioned in the text of the
report. A list of such recommendations is reproduced below for convenience.
Section A.1.1 – The 2017 amendments broadly cover professionals that
would be performing nominee services by way of business. The CDD obliga-
tions do not apply to persons acting as nominees not by way of business. New
Zealand is recommended to monitor the impact of this on EOI in practice on
an on-going basis.
Section A.1.1 and A.3 – New Zealand should ensure that there is suffi-
cient effective guidance to assist reporting entities in interpreting the obliga-
tions under the AML/CFT Act to identify the beneficial owners of customers
in line with the standard.
Section A.1.1 – As the Act does refer to the prescription of regulations, it
remains unclear the circumstances where AML reporting entities can rely on
other sources than a reliable and independent source. New Zealand is recom-
mended to clarify this aspect.
Section A.1.1 – New Zealand should ensure that sufficient guidance is
issued for all reporting entities on what the obligation to perform on-going
CDD entails.
Section A.1.1 and A.3 – It is recommended that New Zealand ensure that
its Third Party Reliance regime is it in line with the international standard
before any exceptions are granted.
Section A.1.1 and A.3 – New Zealand should monitor on an ongoing
basis that beneficial ownership information is available for all New Zealand
incorporated companies and all foreign companies that are resident for tax
purposes in New Zealand.
48. The amendments to the 1988 Convention were embodied into two separate
instruments achieving the same purpose: the amended Convention which inte-
grates the amendments into a consolidated text, and the Protocol amending the
1988 Convention which sets out the amendments separately.
49. Note by Turkey: The information in this document with reference to “Cyprus”
relates to the southern part of the Island. There is no single authority represent-
ing both Turkish and Greek Cypriot people on the Island. Turkey recognises the
Turkish Republic of Northern Cyprus (TRNC). Until a lasting and equitable
solution is found within the context of the United Nations, Turkey shall preserve
its position concerning the “Cyprus issue”.
Note by all the European Union Member States of the OECD and the European
Union: The Republic of Cyprus is recognised by all members of the United
Nations with the exception of Turkey. The information in this document relates to
the area under the effective control of the Government of the Republic of Cyprus.
The reviews are conducted in accordance with the 2016 Methodology for
peer reviews and non-member reviews, as approved by the Global Forum in
October 2015 and the 2016-21 Schedule of Reviews.
The evaluation was based on information available to the assessment
team including the exchange of information arrangements signed, laws and
regulations in force or effective as at 8 January 2018, New Zealand’s EOIR
practice in respect of EOI requests made and received during the three year
period from 1 January 2014 until 31 December 2016, New Zealand’s res-
ponses to the EOIR questionnaire, information supplied by partner jurisdic-
tions, as well as information provided by New Zealand’s authorities during
the on-site visit that took place from 12-15 September 2017 in Wellington,
New Zealand.
Commercial laws
Companies Act (1993), as amended
Partnership Act (1908), as amended
Limited Partnerships Act (2008), as amended
Overseas Investment Act 2005
Trustee Act (1956), as amended
Trustee Companies Act (1967), as amended
Taxation laws
Income Tax Act (2007), as amended
Tax Administration Act (1994), as amended
Goods and Services Tax Act (1985), as amended
Other laws
Constitution Act (1986)
Privacy Act (1993)
Official Information Act (1982)
Report was part of this group of reports. Accordingly, the 2011 Report was
republished in 2013 to reflect the ratings for each element and the overall
rating for New Zealand.
Information on New Zealand’s reviews is included in the table below.
New Zealand welcomes this second round peer review report from the
Global Forum. New Zealand fully endorses the international standards for
transparency and exchange of information and we have supported the work
of the Global Forum since its inception.
New Zealand has a very active and successful exchange of information
programme. We have embraced exchanges in all forms over many years,
recognising the real benefits that arise from such mutual co-operation.
The work of the assessment team in evaluating New Zealand has been
very thorough and we especially appreciate all the positive feedback provided
by peer jurisdictions as well as the Peer Review Group.
Overall, we consider this report to be a fair and reasonable reflection of
New Zealand law and practice. The report has concluded that New Zealand
is performing well across all the essential elements for transparency and
exchange of information.
The report also identifies a few matters which require further attention
in respect of New Zealand’s legal and regulatory framework. We accept the
recommendations that have been made in the report on these issues. We will
proceed to deal with them constructively and take further action as appropriate.
50. This Annex presents the Jurisdiction’s response to the review report and shall not
be deemed to represent the Global Forum’s views.
The Global Forum on Transparency and Exchange of Information for Tax Purposes is a
multilateral framework for tax transparency and information sharing, within which over
140 jurisdictions participate on an equal footing.
The Global Forum monitors and peer reviews the implementation of international standard
of exchange of information on request (EOIR) and automatic exchange of information. The
EOIR provides for international exchange on request of foreseeably relevant information for
the administration or enforcement of the domestic tax laws of a requesting party. All Global
Forum members have agreed to have their implementation of the EOIR standard be assessed
by peer review. In addition, non-members that are relevant to the Global Forum’s work are also
subject to review. The legal and regulatory framework of each jurisdiction is assessed as is the
implementation of the EOIR framework in practice. The final result is a rating for each of the
essential elements and an overall rating.
The first round of reviews was conducted from 2010 to 2016. The Global Forum has agreed
that all members and relevant non-members should be subject to a second round of review
starting in 2016, to ensure continued compliance with and implementation of the EOIR
standard. Whereas the first round of reviews was generally conducted as separate reviews
for Phase 1 (review of the legal framework) and Phase 2 (review of EOIR in practice), the EOIR
reviews commencing in 2016 combine both Phase 1 and Phase 2 aspects into one review.
Final review reports are published and reviewed jurisdictions are expected to follow up on any
recommendations made. The ultimate goal is to help jurisdictions to effectively implement the
international standards of transparency and exchange of information for tax purposes.
For more information on the work of the Global Forum on Transparency and Exchange of
Information for Tax Purposes, please visit www.oecd.org/tax/transparency.
This report contains the 2018 Peer Review Report on the Exchange of Information on Request of
New Zealand.
isbn 978-92-64-29116-4
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