The global tax landscape is undergoing a significant transformation. Leading this change are the OECD’s Pillar 2 Global Anti-Base Erosion (GloBE) rules, which introduce a global minimum corporate tax rate of 15%. New Zealand has now adopted these rules into its domestic law, with the changes taking effect for income years beginning on or after 1 January 2025.
The primary goal of the GloBE rules is to prevent the practice of base erosion and profit shifting (BEPS), where multinational companies shift profits to low-tax jurisdictions. By enforcing a minimum tax rate, the rules aim to ensure large multinationals pay a fair amount of tax in the countries where they operate. For Australian businesses with operations in New Zealand, understanding these changes is critical to ensure compliance and manage potential tax liabilities.
Who do these rules apply to?
The GloBE rules specifically target large multinational enterprise (MNE) groups that operate across multiple jurisdictions, including those with a corporate presence in New Zealand. The rules would apply to MNE groups that have recorded global annual revenues of €750 million or more (approximately NZD 1.3 billion) in at least two of the four preceding income years.
Certain entities are generally not subject to these rules, such as government bodies and agencies or specific investment and pension funds. If your MNE group meets the revenue threshold and has a constituent entity in New Zealand, you will need to prepare for these new obligations.
What do affected businesses need to do?
Compliance with the GloBE rules is a multi-step process that requires careful assessment and preparation. Key actions for affected businesses in New Zealand include:
Registration: The first step is to comply with the necessary registration requirements in New Zealand.
Assess Safe Harbours: Businesses should assess if they meet the thresholds for any available safe harbours, which may allow for simplified calculations.
Calculate the Effective Tax Rate (ETR): A core requirement is to determine the ETR for the MNE group in each jurisdiction in which it operates. If the ETR is below the 15% minimum, a ‘top-up tax’ may be payable.
Prepare Information Returns: Affected MNEs must assess if a GloBE Information Return (GIR) needs to be filed with Inland Revenue. A New Zealand-headquartered MNE will be required to file a GIR with Inland Revenue. A foreign-headquartered MNE may need to file a GIR in New Zealand if its parent jurisdiction does not have an information exchange agreement with New Zealand.
File Top-up Tax Returns: Businesses must prepare and file a Multinational Top-up Tax Return (MTTR) for each New Zealand constituent entity to determine if any top-up tax is payable.
Review Financial Reporting: It is crucial to assess the impact these rules will have on the group’s financial reporting disclosures and tax effect accounting.
Key deadlines are approaching
The deadlines for compliance are strict and depend on the MNE’s balance date. For the first fiscal year, the GIR must be filed within 18 months of the year-end and the MTTR within 20 months. For subsequent years, these timeframes shorten to 15 and 16 months, respectively.
Filing and notification deadlines based on balance date (for illustrative purposes)
| Balance Date | First Fiscal Year | Registration Due (6 months) | First GIR Due (18 months) | First MTTR Due (20 months) |
| 31 December | 1 Jan – 31 Dec 2025 | 30 June 2026 | 30 June 2027 | 31 August 2027 |
| 31 March | 1 Apr 2025 – 31 Mar 2026 | 30 September 2026 | 30 September 2027 | 30 November 2027 |
| 30 June | 1 Jul 2025 – 30 Jun 2026 | 31 December 2026 | 31 December 2027 | 29 February 2028 |
Failure to comply can result in significant penalties, including a NZD 100,000 penalty for non−compliance and a NZD500 penalty for a late or incomplete MTTR filing.
How to prepare
The first step is to confirm whether your MNE group meets the €750 million revenue threshold. If so, you will need to prepare for the annual reporting obligations by implementing policies and procedures to collect the necessary data for the GIR and MTTR filings.
Given the complexity of the GloBE rules, especially for businesses with intricate group structures or operations in low-tax jurisdictions, seeking specialist advice is essential.
The introduction of Pillar 2 rules in New Zealand marks a fundamental shift in international tax. Proactive preparation will be key to navigating this new environment successfully. If you require assistance in understanding your obligations under these new rules, please reach out to your William Buck advisor.
