By Kirstie Anderson & Annamaria Maclean
New Zealand companies managed or controlled from Australia should now be familiar with the risk of dual residency, which has been elevated in recent years by developments in the corporate residency landscape in Australia (refer to our prior article on this if you need a recap).
Australian rules aside, there is still a real risk that New Zealand companies can find themselves tax resident in another jurisdiction depending on the tests of residency employed by other countries they are operating in. Similarly, our domestic rules on tax residency can treat offshore companies as tax resident here where they are managed or controlled from New Zealand, or if they have their head office here.
Under current rules, the consequences of being dual resident can lead to a number of headaches for New Zealand companies that find themselves resident in another country – notably including forfeiture of imputation credits, inability to offset losses to group companies and the inability to be part of a consolidated group.
Changes have been proposed in the Taxation (Annual Rates for 2022-23, Platform Economy and Remedial Matters) Bill (“the Bill”) to ease the burden on companies that find themselves dual resident, in response to the wider net that the ATO has cast which is currently capturing many New Zealand businesses.
But watch out because Inland Revenue has also proposed integrity measures for companies whose residence tie-breaks to another country which could result in additional tax to pay.