New Zealand and Samoa sign DTA

Tax Alert - August 2015

On 8 July 2015, it was announced that Prime Minister John Key signed a double tax agreement with Samoa (the NZ-S DTA).  New Zealand is Samoa’s second largest trading partner and the NZ-S DTA seeks to provide a platform for increased trade and investment between the two countries.

The NZ-S DTA will replace the existing tax information exchange agreement between New Zealand and Samoa when it enters into force.

The withholding tax rate that applies for dividends will be 5% where the beneficial owner of the dividend is a company which holds directly at least 10% of the voting power in the company paying the dividend.  Where this does not apply, all other dividends will subject to a 15% withholding tax rate.

The withholding tax on interest and royalties will be limited to 10% by the NZ-S DTA.

It is of note that the term “royalty” is defined to include “the use of, or the right to use any industrial, scientific or commercial equipment”.  This runs against the more recent trend of moving the taxing of rental or leasing of equipment to fall under the business profits article. 

Like a growing number of DTAs, the NZ-S DTA contains a limitation of benefits article.  Article 21 prescribes that a benefit under the NZ-S DTA shall not be granted where that benefit was one of the principal purposes of any arrangement or transaction.

Unlike recent DTAs, the NZ-S DTA does not contain a non-discrimination article.

As the NZ-S DTA has been signed, it is now awaiting Parliamentary examination before being considered by the relevant select committees.

If you have any questions in relation to the NZ-S DTA, please contact your usual Deloitte advisor. 

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