Double taxation agreement between New Zealand and Thailand
Double taxation is a phenomenon that occurs when two countries levy taxes on the same income, asset or transaction. This can result in an unfair situation where taxpayers are required to pay double the amount of taxes they would normally pay. To prevent this from happening, countries form agreements to avoid double taxation. In this article, we will explore the double taxation agreement (DTA) between New Zealand and Thailand.
Understanding the DTA between New Zealand and Thailand
The double taxation agreement between New Zealand and Thailand was signed in 2005. It is designed to prevent individuals and companies from paying tax on the same income in both countries. The agreement applies to individuals and businesses who are resident in one or both countries.
The primary objective of the DTA is to provide clarity and certainty on tax matters. The agreement sets out rules for determining tax residency, taxation of income, and the elimination of double taxation. The agreement also includes provisions for the exchange of information between the two countries to help combat tax evasion.
Residency rules under the DTA
The DTA defines residency as a person who is liable to tax in a country by reason of their domicile, residence, place of management, place of incorporation or any other criterion of a similar nature. The agreement provides a number of tie-breaker rules to determine residency if a person is considered resident in both countries.
Taxation of income under the DTA
The DTA sets out rules for the taxation of income from various sources, including:
– Business profits: Business profits are taxable in the country where the business is carried out. If a business has a permanent establishment in both countries, the profits will be allocated to each country in proportion to the activity carried out.
– Dividends: Dividends are generally subject to tax in the country where the recipient is resident. The country of residence may also apply a withholding tax.
– Interest: Interest income is generally subject to tax in the country where the recipient is resident. The country of residence may also apply a withholding tax.
– Royalties: Royalties are generally subject to tax in the country where the recipient is resident. The country of residence may also apply a withholding tax.
Elimination of double taxation
The DTA provides for the elimination of double taxation through tax credits and exemptions. In cases where income is subject to tax in both countries, the taxpayer may be entitled to a tax credit in one country for the tax paid in the other country. Alternatively, the income may be exempt from tax in one country if it has already been taxed in the other country.
Exchange of information
The DTA also includes provisions for the exchange of information between the tax authorities of New Zealand and Thailand. This enables the countries to share information to help identify tax evasion and enforce tax laws.
Conclusion
The double taxation agreement between New Zealand and Thailand provides clarity and certainty on tax matters for individuals and businesses that have dealings in both countries. The agreement sets out rules for determining residency, taxation of income, and the elimination of double taxation. This enables taxpayers to avoid paying double tax and provides a mechanism for the enforcement of tax laws.