The OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (IF) has agreed to develop a 2-Pillar solution to address the tax challenges that come from digitising the economy. New Zealand is a member of the OECD and IF.

Pillar 1 and Pillar 2 overview

Pillar 1 creates a framework to ensure multinational enterprises (MNEs) pay tax where they do business, not just where they are based.

Pillar 2 sets a global minimum corporate tax rate that MNE groups must pay regardless of where they are located.

Amount A of Pillar 1

Amount A of Pillar 1 co-ordinates a reallocation of taxing rights to market jurisdictions for a share of the profits of the largest and most profitable MNEs operating in their markets, regardless of their physical presence.

Amount A has not yet been finalised.

Read more about the Inclusive Framework on the OECD website.

OECD/G20 Inclusive Framework releases new multilateral convention to address tax challenges of globalisation and digitalisation (oecd.org)

Amount B of Pillar 1

New Zealand has chosen not to apply Amount B of Pillar 1. You can still use our existing simplification measure for small foreign-owned wholesale distributors. In all other cases use existing transfer pricing rules.

Read about the simplification measure and the consequences of not applying Amount B of Pillar 1 correctly.

Simplification measures for transfer pricing

The IF’s report on Amount B of Pillar 1 is on the OECD website.

Report on Amount B of Pillar 1 (oecd.org)

Pillar 2

The key component of Pillar 2 is the OECD Global Anti-Base Erosion (GloBE) rules. These rules are designed to ensure large MNE groups pay a minimum level of tax in each jurisdiction where they operate.

In March 2024, New Zealand enacted the GloBE rules in the following legislation.

• The Taxation (Annual Rates for 2023–24) Multinational Tax, and Remedial Matters) Act (the Amendment Act)
• Amendments to the Income Tax Act 2007 (the ITA) and Tax Administration Act 1994 (TAA)

The term used in the ITA to describe New Zealand’s GloBE rules is the ‘applied global anti-base erosion rules’ (referred to as the GloBE rules on our website), and the term used for tax imposed under the applied GloBE rules is ‘multinational top-up tax’.

GloBE rules overview

Read more about the 2-Pillar solution on the OECD website.

Statement on a Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy – 8 October 2021 (oecd.org)