NZ, Canada sign new double tax agreement

New Zealand and Canada this morning signed a new double tax agreement (DTA) to replace their 1980 treaty.

The updated agreement was signed at Parliament by Canada’s Minister of International Trade, Ed Fast, and Revenue Minister Peter Dunne.

Mr Dunne said the agreement will help New Zealand-based businesses compete in Canada and make New Zealand a more attractive place to invest in.

“The updated agreement will modernise our tax treaty arrangements with Canada, bringing them more into line with best international practice," Mr Dunne said.

He said double tax agreements help reduce tax impediments to trade and investment between countries by preventing cross-border business income being taxed twice and therefore give greater certainty about how that income will be taxed.

New Zealand now has 37 double tax agreements in force, predominantly with its main trading and investment partners.

A key feature of the updated agreement will be lower withholding taxes on dividend and royalties between New Zealand and Canada, making it cheaper for businesses to invest in each country and to bring profits home for reinvestment or distribution to shareholders.

The withholding rate on dividends will reduce from 15% to a maximum of 5% for an investor who holds at least 10% of the shares in the company that pays the dividend. The withholding rate on royalties has been reduced from 15% to 10% generally, with a further reduced rate of 5% for royalties relating to copyright, computer software and others.

The updated agreement with Canada is an indication of the close relationship between our two countries,” Mr Dunne said.

The updated agreement will come into force once both countries have given legal effect to it. In New Zealand, this will occur through an Order in Council.

The text of the new double tax agreement is available at http://taxpolicy.ird.govt.nz/tax-treaties