Manu Bhai CPA Professional Corporation

Canada–New Zealand Tax Treaty Summary

📌 Scope & Definitions

Article 1 — General Scope

Applies to residents of one or both of Canada and New Zealand
Does not restrict exemptions, deductions, or credits available under domestic law or other agreements
Each State retains the right to tax its own residents under domestic law where the Convention does not provide otherwise
The Convention reflects a modern treaty structure aligned with OECD standards
New Zealand's Tokelau territory is not covered under this Convention

Article 2 — Taxes Covered

Canada: income taxes imposed by the Government of Canada under the Income Tax Act
New Zealand: income tax imposed under the Income Tax Act 2007; fringe benefit tax (FBT); resident withholding tax (RWT); non-resident withholding tax (NRWT)
Applies to any substantially similar future taxes enacted by either country
Does not cover New Zealand GST (goods and services tax), ACC levies (Accident Compensation Corporation), KiwiSaver employer contributions as a tax, stamp duties, customs duties, or local authority rates

Article 3 — General Definitions

Defines: Canada, New Zealand, person, company, competent authority, national, international traffic, taxable year
Canada's competent authority: Minister of National Revenue or authorised representative
New Zealand's competent authority: Commissioner of Inland Revenue or authorised representative
Undefined terms carry their respective domestic-law meaning under the law of the State applying the Convention
New Zealand's look-through companies (LTCs) and limited partnerships are fiscally transparent for New Zealand tax purposes; treaty eligibility flows through to the owners

📌 Residence & Permanent Establishment

Article 4 — Residence

A person is a resident if liable to tax by reason of domicile, residence, place of management, or similar criteria
Dual-residency tie-breakers for individuals applied in order: (1) permanent home, (2) centre of vital interests, (3) habitual abode, (4) nationality, (5) mutual agreement
For companies: resident in the State where place of effective management is situated
Dual-resident companies resolved by mutual agreement between competent authorities
New Zealand treats an individual as resident if domiciled in New Zealand or if present in New Zealand for more than 183 days in any 12-month period
New Zealand's transitional residency rules: individuals who become New Zealand residents after a period of non-residence may qualify for a 4-year exemption on foreign-sourced income; treaty provisions apply alongside this domestic exemption
New Zealand's KiwiSaver funds and superannuation schemes treated as residents of New Zealand for treaty purposes

Article 5 — Permanent Establishment (PE)

PE = fixed place of business: place of management, branch, office, factory, workshop, mine, oil/gas well, quarry, or other place of extraction of natural resources
Building site, construction, assembly, or installation project = PE if it continues for more than 12 months
Service PE: furnishing of services through employees or other personnel = PE if activities continue for more than 183 days within any 12-month period
Supervisory activities connected to a building site = PE if lasting more than 12 months
Dependent agent with authority to habitually conclude contracts = PE
Anti-fragmentation rule: closely related enterprises cannot artificially split activities to avoid PE status
Preparatory or auxiliary activities do not create a PE
Independent broker or agent acting in the ordinary course of business does not create a PE
Offshore PE: exploration or exploitation of natural resources on the continental shelf or exclusive economic zone = PE if lasting more than 90 days in any 12-month period

📌 Business & Property Income

Article 6 — Income from Immovable Property

Income from real property situated in the other State may be taxed in the situs State
Covers agriculture, forestry, direct use, letting, and all other forms of use of immovable property
Applies equally to income from immovable property of an enterprise and from property used for independent personal services
Rights to variable or fixed payments for the working of mineral deposits and other natural resources treated as immovable property
Ships, aircraft, and containers are not treated as immovable property for purposes of this Article
New Zealand's bright-line test for residential property: gains on residential property sold within 10 years of acquisition are taxable in New Zealand; interaction with treaty capital gains provisions requires analysis for Canadian residents owning New Zealand residential property

Article 7 — Business Profits

Taxable only in the residence State unless a PE exists in the other State
If PE exists, the other State may tax profits attributable to the PE on an arm's-length, separate-entity basis
Deductions allowed for executive, general administrative, R&D, and other expenses incurred for the PE regardless of where incurred
No profits attributed to a PE solely from purchasing goods for the enterprise
New Zealand's corporate tax rate is 28%; applies to PE profits
New Zealand's R&D tax incentive providing a 15% tax credit on qualifying R&D expenditure may apply to R&D activities of a Canadian enterprise's New Zealand PE
Profits attributed to a PE determined consistently from year to year using the same method unless there is good reason to change

Article 8 — Shipping and Air Transport

Profits from ships or aircraft in international traffic: taxable only in the residence State
Covers transportation of passengers, mail, livestock, and goods; related activities; incidental rental of ships or aircraft
Container profits used in connection with international transport: taxable only in the residence State
Gains from alienation of ships or aircraft used in international traffic: taxable only in the residence State
Special provision: profits of Air Canada and Air New Zealand given reciprocal exemption treatment

Article 9 — Associated Enterprises (Transfer Pricing)

Each State may adjust income where related-party transactions are not at arm's length
Where one State makes an upward adjustment, the other State shall make a corresponding downward adjustment to avoid double taxation
New Zealand's transfer pricing rules under the Income Tax Act 2007 and Inland Revenue's transfer pricing guidelines apply in conjunction with this Article
Advance pricing agreements (APAs) available from Inland Revenue New Zealand; recommended for significant related-party transactions
New Zealand's transfer pricing rules were significantly strengthened in 2018 to align with OECD BEPS standards

📌 Passive Income — Withholding Rates

Article 10 — Dividends

Direct investment (beneficial owner is a company holding ≥10% of the voting power): 5%
All other cases (portfolio): 15%
Dividends paid to a pension fund or retirement plan that is a resident of the other State and does not hold more than 10% of the paying company: exempt (0%)
Dividends paid to the Government or central bank of the other State: exempt (0%)
Dividends attributable to a PE in the source State: taxed under Business Profits (Article 7)
New Zealand's domestic non-resident withholding tax (NRWT) on dividends is generally 30% (reduced to 15% under most treaties); treaty reduces this to 5% for qualifying direct investors
New Zealand's imputation credit system: imputed dividends carrying New Zealand corporate tax credits may be exempt from NRWT under domestic law; interaction with treaty dividend provisions requires analysis
New Zealand's approved issuer levy (AIL) regime for interest paid to non-residents interacts with treaty interest provisions

Article 11 — Interest

General treaty rate: 10%
Fully exempt (0%) if derived and beneficially owned by:
- The Government, a political subdivision, or central bank of the other State
- The Bank of Canada or the Reserve Bank of New Zealand
- Export Development Canada or New Zealand Export Credit Office (NZECO) or equivalent New Zealand export financing body
- A pension fund or retirement plan that is a resident of the other State
- A financial institution unrelated to and dealing at arm's length with the payer
Excess interest arising from a special relationship between payer and recipient taxed under domestic law
New Zealand's domestic NRWT on interest is generally 15%; treaty reduces this to 10% for general interest
New Zealand's approved issuer levy (AIL): New Zealand resident borrowers may elect to pay a 2% AIL on interest paid to non-residents instead of NRWT; AIL is not creditable as a tax in Canada; specialist advice needed on optimal structure

Article 12 — Royalties

General rate: 10%
Covers payments for use of copyright, patent, trademark, design, secret formula, industrial, commercial, or scientific equipment, and know-how
Cultural royalties (literary, dramatic, musical, or artistic works, excluding films and tapes for broadcasting): 10%
Software royalties: 10%
Equipment royalties: 10%
Royalties attributable to a PE or fixed base: taxed under Article 7
New Zealand's domestic NRWT on royalties is generally 15%; treaty reduces this to 10%

📌 Capital Gains

Article 13 — Gains

Gains from alienation of immovable property situated in the other State: taxable in the situs State
Gains from alienation of shares or comparable interests deriving more than 50% of their value directly or indirectly from immovable property situated in the other State: taxable in the situs State
Gains from alienation of business assets forming part of a PE or fixed base: taxable in the State where the PE or fixed base is situated
Gains from alienation of ships or aircraft in international traffic: taxable only in the residence State
Gains from alienation of shares of a company resident in the other State: may be taxed in the other State if the alienator held at least 10% of the company's capital at any time during the 12 months preceding the alienation
All other gains: taxable only in the residence State
New Zealand generally does not have a comprehensive capital gains tax; however the bright-line test taxes gains on residential property sold within 10 years and certain other gains are taxable under the land provisions and financial arrangement rules
New Zealand's foreign investment fund (FIF) regime taxes New Zealand residents on deemed returns from offshore investments including Canadian shares; this domestic regime applies alongside treaty provisions

📌 Branch Profits Tax

Article 14 — Branch Tax

Canada may impose a branch profits tax on after-tax profits of New Zealand enterprises attributable to a Canadian PE
Treaty rate cap on branch profits tax: 5% where the New Zealand parent holds ≥10% of the Canadian entity; 15% in all other cases
Mirrors the dividend withholding rates to ensure equal treatment of branch and subsidiary operations
New Zealand does not impose an equivalent branch profits tax on Canadian enterprises

📌 Personal Services

Article 15 — Independent Personal Services

Taxable in the residence State
Also taxable in the source State if the individual has a fixed base regularly available in that State, or is present for more than 183 days in any 12-month period
Income attributable to the fixed base or to the period of presence may be taxed in the source State
New Zealand's schedular payment withholding rules may apply to certain independent personal services income; treaty relief obtained through IR exemption or refund

Article 16 — Dependent Personal Services (Employment Income)

Taxable only in the residence State unless work is performed in the other State
Exemption from source-State tax if:
- Individual is present for ≤183 days in any 12-month period, AND
- Remuneration is paid by an employer who is not a resident of the source State, AND
- Remuneration is not borne by a PE or fixed base in the source State
Special rules apply to employees of ships and aircraft in international traffic: taxable only in the residence State of the employer
New Zealand's PAYE (pay as you earn) withholding system requires New Zealand employers to withhold tax on employment income; treaty relief obtained through IR exemption or refund
New Zealand's working holiday visa programme is popular with Canadians; residency status under New Zealand law determines treaty eligibility

Article 17 — Directors' Fees

Directors' fees and similar payments derived by a resident of one State from a company resident in the other State may be taxed in the source State
Applies to members of a board of directors of a New Zealand company
Applies equally to equivalent positions in Canadian companies

Article 18 — Entertainers and Athletes

Income derived by entertainers (theatre, film, radio, TV, music) and athletes from activities performed in the other State may be taxed in the State of performance
Applies regardless of Articles 15 and 16
Exemption if the visit is substantially supported by public funds of the residence State or a political subdivision thereof
Anti-avoidance provision: applies even where income is channelled through a third-party entity rather than paid directly to the entertainer or athlete
New Zealand's film and television production industry attracts significant international talent; treaty provisions are of practical importance for visiting Canadian performers

📌 Government Service, Pensions & Education

Article 19 — Government Service

Salaries paid by a State or its political subdivision to an individual for services rendered to that State: taxable only in the paying State
Exception: taxable only in the other State if the individual is a resident and national of that other State and not a national of the paying State
Government pensions follow the same rules as salary payments above
Special provisions apply to employees of the New Zealand High Commission and Canadian High Commission

Article 20 — Pensions and Annuities

Private pensions and annuities derived by a resident of one State from sources in the other State: taxable only in the residence State
Social security benefits paid by one State to a resident of the other State: taxable only in the paying State
New Zealand Superannuation (NZ Super — the universal state pension) treated as social security for treaty purposes; taxable only in New Zealand when paid to Canadian residents
New Zealand's KiwiSaver: employer and employee contributions and fund accumulations are subject to New Zealand tax rules; withdrawals by Canadian residents generally treated as private pension income taxable only in Canada; specialist advice essential for individuals moving between countries
Canada Pension Plan (CPP) and Old Age Security (OAS) payments to New Zealand residents: taxable only in Canada
Alimony and maintenance payments: taxable only in the recipient's State of residence

Article 21 — Students and Apprentices

A student or business apprentice present in the host State principally for education or training is exempt from tax in the host State on payments received from abroad for maintenance, education, or training
Exemption applies for the duration of full-time study or training only
Does not cover wages from local employment unrelated to the educational or training purpose
New Zealand's world-class universities and polytechnics attract Canadian students; treaty exemption is of practical importance

Article 22 — Professors and Teachers

A professor or teacher who visits the other State for up to 2 years for teaching or research at a recognised educational or research institution is exempt from tax in the host State on remuneration for such teaching or research
Does not apply if the research is undertaken primarily for the private benefit of a specific person or persons
The 2-year exemption period begins from the date of first arrival in the host State for the relevant purpose

📌 Other Income

Article 23 — Other Income

Income of a resident of one State not dealt with elsewhere in the Convention: taxable only in the residence State
Exception: if the income arises in the other State, that State may also tax it under its domestic law
Income attributable to a PE or fixed base: taxed under Article 7 or Article 15

📌 Limitation on Benefits

Article 24 — Limitation on Benefits

Treaty benefits may be denied where the principal purpose of an arrangement was to obtain treaty benefits
Principal purpose test (PPT): benefits denied where one of the principal purposes of an arrangement was to obtain treaty benefits
Competent authorities may deny benefits where a transaction was designed to abuse the Convention
Conduit arrangements: benefits denied where the structure is used to channel payments through an intermediary to non-qualifying third-country residents
Discretionary relief available from competent authorities where benefits are otherwise denied
Both Canada's GAAR and New Zealand's general anti-avoidance rule (section BG 1 of the Income Tax Act 2007) apply in addition to treaty anti-abuse provisions

📌 Relief from Double Taxation

Article 25 — Relief from Double Taxation

Canada: provides a foreign tax credit for New Zealand taxes paid on income arising in New Zealand including income tax and NRWT; credit limited to the proportion of Canadian tax attributable to that income
New Zealand: provides a foreign tax credit for Canadian taxes paid on income arising in Canada; credit limited to the New Zealand tax on that foreign income
New Zealand's foreign tax credit rules under the Income Tax Act 2007 apply; excess credits are not refundable and generally cannot be carried forward
Exemption with progression: exempted income may still be taken into account in determining the applicable tax rate on remaining income
New Zealand's AIL (approved issuer levy) paid by a New Zealand borrower is not a tax paid by the Canadian lender and therefore not creditable in Canada; this creates a structural mismatch that requires specialist advice

📌 Non-Discrimination & Procedure

Article 26 — Non-Discrimination

Nationals of one State shall not be subjected to more burdensome taxation in the other State than nationals of that other State in the same circumstances
Stateless persons resident in one State are also protected
PE of an enterprise of one State shall not be taxed less favourably than enterprises of the other State carrying on the same activities
Deductibility of interest, royalties, and other payments to residents of the other State cannot be restricted solely on grounds of foreign residence
Companies owned by residents of the other State shall not be subject to more burdensome taxation than similar domestic companies

Article 27 — Mutual Agreement Procedure (MAP)

Residents may present cases to the competent authority of their State within 3 years of first notification of taxation not in accordance with the Convention
Competent authorities shall endeavour to resolve disputes by mutual agreement
Competent authorities may communicate directly, including through a joint commission
Both Canada and New Zealand have well-resourced competent authority programmes with generally reasonable MAP resolution timelines
New Zealand's Inland Revenue and Canada's CRA maintain a constructive bilateral relationship

Article 28 — Exchange of Information

Competent authorities shall exchange information necessary for carrying out the Convention and domestic tax laws
Information received shall be treated as confidential and disclosed only to persons involved in tax administration and enforcement
Banking secrecy and lack of domestic interest cannot be invoked to refuse exchange of information
Each State shall use best endeavours to collect taxes on behalf of the other State
Automatic exchange of financial account information under CRS supplements treaty exchange provisions
New Zealand participates fully in OECD CRS and automatic exchange of information frameworks
Both New Zealand and Canada are members of the OECD and Five Eyes intelligence alliance; strong bilateral tax enforcement cooperation exists

Article 29 — Diplomatic Agents and Consular Officers

Nothing in the Convention affects the fiscal privileges of diplomatic agents and consular officers under general rules of international law or special agreements

📌 Entry into Force & Termination

Article 30 — Entry into Force

The original Convention was signed on 3 May 1980 and entered into force on 26 June 1981
A Protocol updating various provisions including exchange of information, BEPS anti-avoidance measures, and withholding rates was signed on 3 May 2012 and entered into force on 26 April 2015
The 2012 Protocol introduced reduced dividend withholding rates, pension fund exemptions, government entity exemptions, and enhanced anti-avoidance provisions
Effective for withholding taxes: income arising on or after 1 January of the year following entry into force of each instrument
Effective for other taxes: taxable years beginning on or after 1 January of the year following entry into force

Article 31 — Termination

Convention remains in force indefinitely
Either State may terminate by giving written notice through diplomatic channels on or before 30 June of any calendar year; Convention ceases to have effect from 1 January of the following year

📌 Practical Considerations Unique to Canada–New Zealand

KiwiSaver: New Zealand's KiwiSaver retirement savings scheme creates complex cross-border issues for Canadian-New Zealand individuals; employer contributions (3% of gross salary) are compulsory for eligible employees; the treaty treatment of KiwiSaver contributions (not deductible in Canada), fund accumulations, and eventual withdrawals requires specialist advice; a bilateral social security agreement between Canada and New Zealand coordinates certain aspects but does not fully resolve all pension issues
New Zealand Bright-Line Test: New Zealand's bright-line test taxes gains on residential property sold within 10 years of acquisition; Canadian residents owning New Zealand residential property should be aware that gains may be taxable in New Zealand under domestic law even if the treaty's capital gains provisions would otherwise allocate taxing rights to Canada; the interaction requires careful analysis
FIF Regime: New Zealand's foreign investment fund (FIF) regime taxes New Zealand residents on deemed returns from offshore investments (including Canadian shares) using the fair dividend rate method or comparative value method; this domestic regime operates alongside treaty provisions and may result in New Zealand tax on unrealised gains; Canadian residents becoming New Zealand residents should seek advice before retaining Canadian investments
Transitional Residency: New Zealand's transitional residency exemption provides a 4-year window during which new residents are exempt from New Zealand tax on foreign-sourced income; Canadians relocating to New Zealand should time their move and asset realisations carefully to maximise this exemption; treaty provisions interact with the transitional residency rules
Approved Issuer Levy (AIL): New Zealand's AIL regime allows New Zealand borrowers to pay a 2% levy on interest paid to non-residents instead of NRWT; the AIL is paid by the New Zealand borrower not the Canadian lender; the AIL is not creditable in Canada as it is not a tax borne by the Canadian lender; this creates a structural mismatch requiring specialist advice for cross-border lending arrangements
No Comprehensive CGT: New Zealand does not have a comprehensive capital gains tax; this is a distinctive feature of the bilateral relationship; Canadian investors in New Zealand shares and other assets may not face New Zealand CGT on disposal; however the FIF regime, bright-line test, and land provisions create significant exceptions
Film Industry: New Zealand's significant film and television production industry (Lord of the Rings, Avatar, etc.) attracts Canadian film professionals; the treaty entertainers and athletes provisions interact with New Zealand's domestic withholding rules for non-resident contractors; specialist advice recommended for Canadian film industry participants working in New Zealand
Working Holiday Visas: New Zealand and Canada have a bilateral working holiday agreement; Canadian citizens on working holiday visas in New Zealand may be treated as New Zealand residents for tax purposes if present for more than 183 days; treaty provisions apply based on residency status
MLI: Both Canada and New Zealand have ratified the OECD MLI; the 2012 Protocol already incorporated some BEPS measures; MLI modifications to this treaty including PPT and PE provisions should be reviewed against both countries' MLI positions
Social Security Agreement: A bilateral social security agreement between Canada and New Zealand exists separately from the income tax treaty; this agreement coordinates CPP and New Zealand Superannuation entitlements for individuals who have lived and worked in both countries; it is separate from and complementary to the income tax treaty
Five Eyes: Canada and New Zealand are both members of the Five Eyes intelligence alliance and participate in extensive information sharing including for tax enforcement purposes; the ATO, Inland Revenue New Zealand, CRA, HMRC, and IRS cooperate closely through JITSIC; this enhances detection of undisclosed offshore income and assets

This summary is for general reference only. Always consult the full Convention text, the 2012 amending Protocol, and any OECD Multilateral Instrument (MLI) modifications for authoritative guidance. Rates shown are maximum treaty rates; lower domestic rates take precedence. The interaction between New Zealand's KiwiSaver, FIF regime, bright-line test, approved issuer levy, and Canadian foreign tax credit rules makes Canada–New Zealand tax planning particularly distinctive; professional advice from specialists in both Canadian and New Zealand tax law is strongly recommended for any cross-border planning or compliance matters.