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December 8, 2023

New Zealand Government reinstates bill introducing Pillar Two rules, following General Election

  • When the New Zealand Parliament resumed sitting on 6 December, the new Government chose to reinstate a bill that introduces the OECD's GloBE Pillar Two Rules into domestic law.
  • Although the Government has not yet made any amendments to the Bill, amendments are possible in response to public submissions received to date.
  • The bill is likely to progress to enactment by 31 March 2024.

Executive summary

Following the formation of a new coalition Government and the reconvening of Parliament this week, the Taxation (Annual Rates for 2023-24, Multinational Tax, and Remedial Matters) Bill (Multinational Bill or Bill) has been reinstated unchanged.

When the New Zealand Parliament was suspended ahead of the General Election, held on 14 October 2023, the Multinational Bill was among the unenacted bills that lapsed. The Multinational Bill would introduce the Organisation for Economic Co-operation and Development (OECD) Global Anti-Base Erosion (GloBE) Pillar Two Rules into New Zealand domestic tax law.

The New Zealand Pillar Two rules would apply to all multinational groups (MNE groups) with a consolidated accounting revenue of €750m or more.

It is possible that further amendments will be made to incorporate the new Government's policy preferences and/or public submissions received as part of the ordinary legislative processes.

The Multinational Bill is expected to progress to enactment by 31 March 2024.

Detailed discussion

The Multinational Bill was originally introduced in May 2023 to bring the GloBE Pillar Two Model Rules into New Zealand domestic law. The overall New Zealand package is referred to as the "Applied GloBE Rules."

Key aspects of the Applied GloBE Rules are:

  • The package includes an Income Inclusion Rule (IIR) and Undertaxed Profits Rule (UTPR), together with a Domestic Income Inclusion Rule.
  • A €750m threshold will apply.
  • Any top-up tax collected under the IIR or UTPR will not give rise to imputation credits, but top-up tax collected under the Domestic IIR will give rise to imputation credits.
  • Top-up tax paid overseas under either the IIR or UTPR would not give rise to foreign tax credits in New Zealand.
  • The new rules will override existing double-tax treaties with New Zealand (unless the double-tax treaty specifically refers to the Pillar Two rules).

In one departure from OECD norms, New Zealand proposes a Domestic IIR, which uses the same tax base as the Pillar Two Rules for calculation purposes. It is limited in scope and applies only to the profits of domestic low-taxed constituent entities of New Zealand-headquartered MNE groups. This distinguishes it from a domestic Qualified Minimum Top-Up Tax as defined by the OECD (and adopted by many other OECD countries).

To ensure consistency with the OECD Model Rules, New Zealand will largely adopt these rules into domestic tax legislation by direct reference, as a package, together with the proposed Domestic IIR.

The newly elected Government will now consider whether amendments to the Bill will be necessary to better reflect the new Government's policy preferences and in response to public submissions.

For a more detailed discussion of the proposed New Zealand Applied GloBE Rules, see EY Global Tax Alert, New Zealand to adopt the OECD GloBE (Pillar Two) rules, dated 25 May 2023.

Next steps

The Multinational Bill is presently before the Finance and Expenditure Parliamentary Select Committee, which will likely report back on any recommended amendments in early February 2024, following the hearing of public submissions. Given the need to enact other aspects of this Bill, notably the need to set the annual tax rates by 31 March 2024, the Bill is likely to progress relatively quickly toward enactment in the first quarter of 2024.

The application date of the Applied GloBE Rules is not immediate. It will need to be separately agreed upon by Parliament with reference to the take-up of these rules in other territories.


For additional information with respect to this Alert, please contact the following:

Ernst & Young Limited (New Zealand), Auckland

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor