Agreement BETWEEN THE GOVERNMENT OF THE UNITED KINGDOM AND THE GOVERNMENT OF NEW ZEALAND FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME

Appendix to the Journals of the House of Representatives, 1947 Session I, A-10

A—lo 1947 NEW ZEALAND

Agreement BETWEEN THE GOVERNMENT OF THE UNITED KINGDOM AND THE GOVERNMENT OF NEW ZEALAND FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME

Presented to both Houses of the General Assembly by Leave

By Authority: E. V. Paul, Government Printer, Wellington—l9l7

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Agreement between the Government of the United Kingdom and the Government of New Zealand for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to taxes on income. The Government of the United Kingdom of Great Britain and Northern Ireland and the Government of New Zealand, desiring to conclude an agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, have agreed as follows : ARTICLE I (1) The taxes which are the subject of the present Agreement are—{a) In New Zealand : The income tax and the social security charge (hereinafter referred to as " New Zealand tax "). (b) In the United Kingdom of Great Britain and Northern Ireland : The income tax (including sur-tax) and the profits tax (hereinafter referred to as " United Kingdom tax "). (2) The present Agreement shall also apply to any other taxes of a substantially similar character imposed by either Contracting Government subsequently to the date of signature of the present Agreement or by the Government of any territory to which the present Agreement is extended under Article XVI. ARTICLE II (1) In the present Agreement, unless the context otherwise requires—(a) The term " United Kingdom" means Great Britain and Northern Ireland, excluding the Channel Islands and the Isle of Man. (b) The term " New Zealand" includes all islands and territories within the limits thereof for the time being, including the Cook Islands. (?) The terms " one of the territories " and " the other territory " mean the United Kingdom or New Zealand, as the context requires. (d) The term " tax" means United Kingdom tax or New Zealand tax, as the context requires. (e) The term " person " includes any body of persons, corporate or not corporate. (/) The term " company " means any body corporate.

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(g) The terms " resident of the United Kingdom " and " resident of New Zealand " mean respectively any person who is resident in the United Kingdom for the purposes of United Kingdom tax and not resident in New Zealand for the purposes of New Zealand tax and any person who is resident in New Zealand for the purposes of New Zealand tax and not resident in the United Kingdom for the purposes of United Kingdom tax; and a company shall be regarded as resident in the United Kingdom and not resident in New Zealand if its business is managed and controlled in the United Kingdom and as resident in New Zealand and not resident in the United Kingdom if its business is managed and controlled in New Zealand. (h) The terms " resident of one of the territories " and " resident of the other territory " mean a person who is a resident of the United Kingdom or a person who is a resident of New Zealand, as the context requires. (/) The terms " United Kingdom enterprise" and " New Zealand enterprise " mean respectively an industrial or commercial enterprise or undertaking carried on by a resident of the United Kingdom and an industrial or commercial enterprise or undertaking carried on by a resident of New Zealand ; and the terms " enterprise of one of the territories " and " enterprise of the other territory " mean a United Kingdom enterprise or a New Zealand enterprise, as the context requires. (j) The term " industrial or commercial enterprise or undertaking " includes an enterprise or undertaking engaged in mining, agricultural or pastoral activities, or in the business of banking, insurance, life insurance or dealing in investments, and the term " industrial or commercial profits " includes profits from such activities or business but does not include income in the form of dividends, interest, rents, royalties, management charges, or remuneration for personal services. (k) The term " permanent establishment" when used with respect to an enterprise of one of the territories, means a branch, management, factory, mine, farm, or other fixed place of business, but does not include an agency in the other territory unless the agent has, and habitually exercises, a general authority to negotiate and conclude contracts on behalf of such enterprise or regularly fills orders on its behalf from a stock of goods or merchandise in that other territory. An enterprise of one of the territories shall not be deemed to have a permanent establishment in the other territory merely because it carries on business dealings in that other territory through a bona fide broker or general commission agent acting in the ordinary course of his business as such and receiving remuneration in respect of those dealings at a rate not less than that customary in the class of busines in question.

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The fact that an enterprise of one of the territories maintains in the other territory a fixed place of business exclusively for the purchase of goods or merchandise shall not of itself constitute that fixed place of business a permanent establishment of the enterprise. The fact that a company which is a resident of one of the territories has a subsidiary company which is a resident of the other territory or which is engaged in trade or business in that other territory (whether through a permanent establishment or otherwise) shall not of itself constitute that subsidiary company a permanent establishment of its parent company. (2) The terms " New Zealand tax " and " United Kingdom tax ", as used in the present Agreement, do not include any tax payable in New Zealand or the United Kingdom which represents a penalty imposed under the law of New Zealand or the United Kingdom relating to the taxes which are the subject of the present Agreement. (3) In the application of the provisions of the present Agreement by one of the Contracting Governments any term not otherwise defined shall, unless the context otherwise requires, have the meaning which it has under the laws of that Contracting Government relating to the taxes which are the subject of the present Agreement. ARTICLE 111 (1) The industrial or commercial profits of a United Kingdom enterprise shall not be subject to New Zealand tax unless the enterprise is engaged in trade or business in New Zealand through a permanent establishment situated therein. If it is so engaged, tax may be imposed on those profits by New Zealand, but only on so much of them as is attributable to that permanent establishment: Provided that nothing in this paragraph shall affect any provisions of the law of New Zealand regarding the taxation of income from the business of insurance. (2) The industrial or commercial profits of a New Zealand enterprise shall not be subject to United Kingdom tax unless the enterprise is engaged in trade or business in the United Kingdom through a permanent establishment situated therein. If it is so engaged, tax may be imposed on those profits by the United Kingdom, but only on so much of them as is attributable to that permanent establishment. (3) Where an enterprise of one of the territories is engaged in trade or business in the other territory through a permanent establishment situated therein, there shall be attributed to that permanent establishment the industrial or commercial profits which it might be expected to derive in that other territory if it were an independent enterprise engaged in the same or similar activities and its dealings with the enterprise of which it is a permanent establishment were

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dealings at arm's length with that enterprise or an independent enterprise; and the profits so attributed shall be deemed to be income derived from sources in that other territory. If the information available to the taxation authority concerned is inadequate to determine the profits to be attributed to the permanent establishment, nothing in this paragraph shall affect the application of the law of either territory in relation to the liability of the permanent establishment to pay tax on an amount determined by the exercise of a discretion or the making of an estimate by the taxation authority of that territory : Provided that such discretion shall be exercised or such estimate shall be made, so far as the information available to the taxation authority permits, in accordance with the principle stated in this paragraph. (4) Profits derived by an enterprise of one of the territories from sales, under contracts concluded in that territory, of goods or merchandise stocked in a warehouse in the other territory for convenience of delivery and not for purposes of display shall not be attributed to a permanent establishment of the enterprise in that other territory, notwithstanding that the offers of purchase have been obtained by an agent of the enterprise in that other territory and transmitted by him to the enterprise for acceptance. (5) No portion of any profits arising from the sale of goods or merchandise by an enterprise of one of the territories shall be attributed to a permanent establishment situated in the other territory by reason of the mere purchase of the goods or merchandise within that other territory. ARTICLE IV (1) Where—{a) An enterprise of one of the territories participates directly or indirectly in the management, control or capital of an enterprise of the other territory, or (b) The same persons participate directly or indirectly in the management, control or capital of an enterprise of one of the territories and an enterprise of the other territory and (V) In either case conditions are operative between the two enterprises in their commercial or financial relations which differ from those which might be expected to operate between independent enterprises dealing at arm's length with one another, then, if by reason of those conditions profits which might be expected to accrue to one of the enterprises do not accrue to that enterprise, there may be included in the profits of that enterprise the profits which would have accrued to it if it were an independent enterprise and its dealings with the other enterprise were dealings at arm's length with that enterprise or an independent enterprise.

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(2) Profits included in the profits of an enterprise of one of the territories under paragraph (1) of this Article shall be deemed to be income derived from sources in that territory and shall be taxed accordingly. (3) If the information available to the taxation authority concerned is inadequate to determine, for the purposes of paragraph (1) of this Article, the profits which might be expected to accrue to an enterprise, nothing in that paragraph shall affect the application of the law of either territory in relation to the liability of that enterprise to pay tax on an amount determined by the exercise of a discretion or the making of an estimate by the taxation authority of that territory : Provided that such discretion shall be exercised or such estimate shall be made, so far as the information available to the taxation authority permits, in accordance with the principle stated in that paragraph. ARTICLE V Notwithstanding the provisions of Articles 111 and IV, profits» which a resident of one of the territories derives from operating ships or aircraft shall be exempt from tax in the other territory. ARTICLE VI (1) Dividends paid by a company resident in one of the territories to a resident of the other territory who is subject to tax in that other territory in respect thereof and not engaged in trade or business in the first-mentioned territory through a permanent establishment situated therein, shall be exempt from any tax in that first-mentioned territory which is chargeable on dividends in addition to the tax chargeable in respect of the profits or income of the company : Provided that dividends paid by a company resident in New Zealand to a person who is a resident of the United Kingdom may be included in that person's total income for the purposes of determining the amount of any New Zealand tax payable in respect of income of that person other than such dividends. (2) Where a company which is a resident of one of the territories derives profits or income from sources within the other territory, the Government of that other territory shall not impose any form of taxation on dividends paid by the company to persons not resident in that other territory, or any tax in the nature of an undistributed profits tax on undistributed profits of the company, by reason of the fact that these dividends or undistributed profits represent, in whole or in part, profits or income so derived.

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ARTICLE VII (1) Any royalty derived from sources within one of the territories by a resident of the other territory who is subject to tax in that other territory in respect thereof and not engaged in trade or business in the first-mentioned territory through a permanent establishment situated therein, shall be exempt from tax in that first-mentioned territory; but no exemption shall be allowed under this Article in respect of so much of any such royalty as exceeds an amount which represents a fair and reasonable consideration for the rights for which the royalty is paid. (2) In this Article the term " royalty " means any royalty or other amount paid as consideration for the use of, or for the privilege of using, any copyright, patent, design, secret process or formula, trade-mark, or other like property, but does not include royalties or other amounts paid in respect of the operation of mines or quarries or of the extraction or removal of timber or other natural resources or rents or royalties in respect of motion picture films. ARTICLE VIII (1) Remuneration (other than pensions) paid by one of the Contracting Governments to any individual for services rendered to that Contracting Government in the discharge of governmental functions shall be exempt from tax in the territory of the other Contracting Government if the individual is not ordinarily resident in that territory or is ordinarily resident in that territory solely for the purpose of rendering those services. (2) The provisions of this Article shall not apply to payments in respect of services rendered in connection with any trade or business carried on by either of the Contracting Governments for purposes of profit. ARTICLE IX (1) An individual who is a resident of the United Kingdom shall be exempt from New Zealand tax on profits or remuneration in respect of personal (including professional) services performed within New Zealand in any income year if—{a) He is present within New Zealand for a period or periods not exceeding in the aggregate 183 days during that year, and (b) The services are performed for or on behalf of a person resident in the United Kingdom, and (c) The profits or remuneration are subject to United Kingdom tax.

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(2) An individual who is a resident of New Zealand shall be exempt from United Kingdom tax on profits or remuneration in respect of personal (including professional) services performed within the United Kingdom in any year of assessment if—(a) He is present within the United Kingdom for a period or periods not exceeding in the aggregate 183 days during that year, and (b) The services are performed for or on behalf of a person resident in New Zealand, and (<r) The profits or remuneration are subject to New Zealand tax. (3) The provisions of this Article shall not apply to the profits or remuneration of public entertainers such as stage, motion picture or radio artists, musicians and athletes. ARTICLE X (1) Any pension or annuity, derived from sources within one of the territories by an individual who is a resident of the other territory and liable to tax in that other territory in respect thereof, shall be exempt from tax in the first-mentioned territory. (2) The term " annuity " means a stated sum payable periodically at stated times, during life or during a specified or ascertainable period of time, under an obligation to make the payments in consideration of money paid. ARTICLE XI A professor or teacher from one of the territories who receives remuneration for teaching, during a period of temporary residence not exceeding two years, at a university, college, school or other educational institution in the other territory, shall be exempt from tax in that other territory in respect of that remuneration. ARTICLE XII A student or business or trade apprentice from one of the territories who is receiving full-time education or training in the other territory shall be exempt from tax in that other territory on payments made to him by persons in the first-mentioned territory for the purposes of his maintenance, education or training. ARTICLE XIII Income of a person who is a resident of the United Kingdom (other than dividends paid by a company resident in New Zealand) which is exempt from New Zealand tax under any provision of the present Agreement shall not be included in that person's total

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income for the purposes of determining the amount of any NewZealand tax payable in respect of income of that person which is assessable to New Zealand tax. ARTICLE XIV (1) Subject to the provisions of the law of the United Kingdom regarding the allowance as a credit against United Kingdom tax of tax payable in a territory outside the United Kingdom, New Zealand tax payable, whether directly or by deduction, in respect of income from sources within New Zealand shall be allowed as a credit against any United Kingdom tax payable in respect of that income. Where such income is an ordinary dividend paid by a company resident in New Zealand, the credit shall take into account the New Zealand tax payable in respect of its profits by the company paying the dividend, and where it is a dividend paid on participating preference shares and representing both a dividend at the fixed rate to which the shares are entitled and an additional participation in profits, the New Zealand tax so payable by the company shall likewise be taken into account in so far as the dividend exceeds that fixed rate. For the purposes of this paragraph any amount which is included in a person's taxable income under any provision of the law of New Zealand regarding the taxation of income from the business of insurance shall be deemed to be derived from sources in New Zealand. (2) Where New Zealand tax is payable in respect of income derived from sources in the United Kingdom by a person who is a resident of New Zealand, being income in respect of which United Kingdom tax is payable, whether directly or by deduction, the United Kingdom tax so payable (reduced by the amount of any relief or repayment attributable to that income to which that person is entitled under the law of the United Kingdom) shall, subject to such provisions (which shall not affect the general principle hereof) as may be enacted in New Zealand, be allowed as a credit against the New Zealand tax (other than the social security charge) payable in respect of that income : Provided that where the income is a dividend paid by a company resident in the United Kingdom the credit shall be allowed only if the recipient elects for the purposes of this paragraph to have the amount of such dividend together with the United Kingdom tax (as so reduced) included in his assessable income for the purposes of New Zealand tax. Where such income is an ordinary dividend paid by a company resident in the United Kingdom, the credit shall take into account (in addition to any United Kingdom income tax appropriate to the

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dividend) the United Kingdom profits tax payable by the company in respect of its profits, and where it is a dividend paid on participating preference shares and representing both a dividend at the fixed rate to which the shares are entitled and an additional participation in profits, the profits tax so payable by the company shall likewise be taken into account in so far as the dividend exceeds that fixed rate. (3) For the purposes of this Article profits or remuneration for personal (including professional) services performed in one of the territories shall be deemed to be income from sources within that territory, and the services of an individual whose services are wholly or mainly performed in ships or aircraft operated by a resident of one of the territories shall be deemed to be performed in that territory. ARTICLE XV (1) The taxation authorities of the Contracting Governments shall exchange such information (being information available under the respective taxation laws of the Contracting Governments) as is necessary for carrying out the provisions of the present Agreement or for the prevention of fraud or for the administration of statutory provisions against legal avoidance in relation to the taxes which are the subject of the present Agreement. Any information so exchanged shall be treated as secret and shall not be disclosed to any personsother than persons (including a Court) concerned with the assessment or collection of, or the determination of appeals in relation to, the taxes which are the subject of the present Agreement. No information shall be exchanged which would disclose any trade secret or trade process. (2) As used in this Article, the term " taxation authorities " means,, in the case of New Zealand, the Commissioner of Taxes or his authorized representative ; in the case of the United Kingdom, the Commissioners of Inland Revenue or their authorized representative ; and, in the case of any territory to which the present Agreement is extended under Article XVI, the competent authority for the administration in such territory of the taxes to which the present Agreement applies. ARTICLE XVI (1) Either of the Contracting Governments may, on the coming into force of the present Agreement or at any time thereafter while it continues in force, by a written notification of extension given to the other Contracting Government, declare its desire that the operation of the present Agreement shall extend, subject to such modification as may be necessary, to all or any of its colonies, overseas territories,, protectorates, or territories in respect of which it exercises a mandate

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or trusteeship, which impose taxes substantially similar in character to those which are the subject of the present Agreement. The present Agreement shall, subject to such modifications (if any) as may be specified in the notification, apply to the territory or territories named in such notification on the date or dates specified in the notification (not being less than sixty days from the date of the notification) or, if no date is specified in respect of any such territory, on the sixtieth day after the date of the notification, unless prior to the date on which the Agreement would otherwise become applicable to a particular territory, the Contracting Government to whom notification is given shall have informed the other Contracting Government in writing that it does not accept the notification as to that territory. In the absence of such an extension, the present Agreement shall not apply to any such territory. (2) At any time after the expiration of one year from the entry into force of an extension under paragraph (1) of this Article, either of the Contracting Governments may, by written notice of termination given to the other Contracting Government, terminate the application of the present Agreement to any territory to which it has been extended under paragraph (1), and in that event the present Agreement shall cease to apply, as from the date or dates •specified in the notice or if no date is specified at the expiration of six months after the date of the notice, to the territory or territories named therein, but without affecting its continued application to New Zealand, the United Kingdom or to any other territory to "which it has been extended under paragraph (1) hereof. (3) In the application of the present Agreement in relation to any territory to which it is extended by notification by the United Kingdom or New Zealand, references to the " United Kingdom " or, as the case may be, " New Zealand" shall be construed as references to that territory. (4) The termination in respect of New Zealand or the United Kingdom of the present Agreement under Article XIX shall, unless otherwise expressly agreed by both Contracting Governments, terminate the application of the present Agreement to any territory to which the Agreement has been extended by New Zealand or the United Kingdom. (5) The provisions of the preceding paragraphs of this Article shall apply to the Channel Islands and the Isle of Man as if they were colonies of the United Kingdom.

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ARTICLE XVII The present Agreement shall come into force on the date on which the last of all such things shall have been done in the United Kingdom and New Zealand as are necessary to give the Agreement the force of law in the United Kingdom and New Zealand respectively, and shall thereupon have effect—(a) In the United Kingdom, as respects income tax for the year of assessment beginning on the 6th day of April, 1947, and subsequent years ; as respects sur-tax for the year of assessment beginning on the 6th day of April, 1946, and subsequent years ; and as respects profits tax for any chargeable accounting period beginning on or after the first day of January, 1947, and for the unexpired portion of any chargeable accounting period current at that date ; (b) In New Zealand, as respects income tax for the year of assessment beginning on the first day of April, 1947, and subsequent years ; as respects social security charge on salaries and wages as from the first day of April, 1947 ; and as respects social security charge on income other than salaries and wages for the financial year beginning on the first day of April, 1946, and subsequent years. ARTICLE XVIII The present Agreement shall be deemed to have superseded the Agreement made on the tenth day of March, 1942, between the Government of the United Kingdom and the Government of New Zealand for reciprocal exemption from income tax in certain cases of profits or gains arising through an agency, and that Agreement shall cease to have effect — (a) In the United Kingdom, as respects income tax for the year of assessment beginning on the 6th day of April, 1947, and subsequent years, and as respects sur-tax for the year of assessment beginning on the 6th day of April, 1946, and subsequent years ; (b) In New Zealand, for the year of assessment beginning on the first day of April, 1947, and subsequent years. ARTICLE XIX The present Agreement shall continue in effect indefinitely but either of the Contracting Governments may, on or before the 30th day of September in any calendar year after the year 1948, give notice

of termination to the other Contracting Government and, in such event, the present Agreement shall cease to be effective — {a) In the United Kingdom, as respects income tax for any year of assessment beginning on or after the 6th day of April in the calendar year next following that in which such notice is given; as respects sur-tax for any year of assessment beginning on or after the 6th day of April in the calendar year in which such notice is given ; and as respects profits tax for any chargeable accounting period beginning on or after the first day of January in the calendar year next following that in which such notice is given and for the unexpired portion of any chargeable accounting period current at that date; (b) In New Zealand, for any year of assessment beginning on or after the first day of April in the calendar year next following that in which such notice is given : In witness whereof the undersigned, duly authorized thereto, have signed the present Agreement and have affixed thereto their seals. Done in duplicate, on the twenty-seventh day of May, one thousand nine hundred and forty-seven. For the Government of the United Kingdom : (Sgd.) Hugh Dalton. (seal) For the Government of New Zealand : (Sgd.) W. Nash.

Approximate Cost of Paper. —Preparation, not given ; printing (550 copies), £l9. By Authority: E. V. Paul, Government Printer, Wellington.—1947. 'Price, Gd.]