The New Zealand-United States Double Tax Agreement: What You Need to Know
If you`re doing business or investing in both New Zealand and the United States, you need to be aware of the double tax agreement (DTA) between these two countries.
A DTA is an agreement between two countries to avoid double taxation of income earned in both countries. It usually sets out rules on how income is taxed and which country has the right to tax particular types of income.
New Zealand and the United States signed their first DTA in 1982, but this agreement was updated in 2008 to reflect changes in tax laws and business practices. The current DTA is based on the OECD Model Tax Convention, which is a framework for international tax agreements.
Here are some key things you should know about the New Zealand-United States DTA:
1. Resident vs. non-resident
The DTA applies to residents of both New Zealand and the United States. A resident is generally a person or company that is subject to tax in that country based on its place of residence. If you`re a resident of one country doing business in the other country, the DTA will apply to you.
2. Types of income
The DTA covers different types of income, including business profits, dividends, interest, royalties, and capital gains. It sets out rules on how each type of income is taxed and which country has the right to tax it. For example, business profits are generally taxed in the country where the business has a permanent establishment, while dividends are usually taxed in the country where the shareholder is a resident.
3. Relief from double taxation
The DTA provides relief from double taxation by allowing taxpayers to claim a credit for foreign taxes paid on income earned in the other country. This reduces the overall tax burden and ensures that income is not taxed twice.
4. Exchange of information
The DTA also includes provisions for the exchange of information between the two countries to prevent tax evasion and fraud. This allows tax authorities to access information about taxpayers and their financial activities in the other country.
Overall, the New Zealand-United States DTA is an important agreement for businesses and investors operating in both countries. It helps to avoid double taxation, provides relief from tax burdens, and promotes cooperation between tax authorities. If you`re doing business in both New Zealand and the United States, it`s important to understand the rules and provisions of the DTA to ensure compliance with tax laws and regulations.