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HMRC internal manual

Double Taxation Relief Manual

DT: New Zealand: double taxation agreement, Article 8: Business profits

(1) The profits of an enterprise of a Contracting State shall be taxable only in thatState unless the enterprise carries on business in the other Contracting State through apermanent establishment situated therein. If the enterprise carries on business asaforesaid, the profits of the enterprise may be taxed in the other State but only so muchof them as is attributable to that permanent establishment.

(2) Subject to the provisions of paragraph (3) of this Article, where an enterprise of aContracting State carries on business in the other Contracting State through a permanentestablishment situated therein, there shall in each Contracting State be attributed tothat permanent establishment the profits which it might be expected to make if it were adistinct and separate enterprise engaged in the same or similar activities under the sameor similar conditions and dealing wholly independently with the enterprise of which it isa permanent establishment.

(3) In determining the profits of a permanent establishment, there shall be allowed asdeductions expenses which are incurred for the purposes of the business of the permanentestablishment, including executive and general administrative expenses so incurred,whether in the State in which the permanent establishment is situated or elsewhere, andwhich are reasonably connected with profits attributable to the permanent establishment.

(4) No profits shall be attributed to a permanent establishment by reason of the merepurchase by that permanent establishment of goods or merchandise for the enterprise.

(5) Where profits include items of income which are dealt with separately in otherArticles of this Convention, then the provisions of those Articles shall not be affectedby the provisions of this Article.

Paragraph (6) of Article 8 of the Agreement was replaced under SI 2004/1274. The change iseffective in the United Kingdom in respect of income tax from 6 April 2005, in respect ofcorporation tax from 1 April 2005 and in New Zealand from 1 April 2005.

(6) Notwithstanding the provisions of this Article, income or profits from any kind ofinsurance shall be taxed in accordance with the laws of either Contracting State. However,in the case of insurance other than life insurance, if an enterprise of one of theContracting States derives premiums paid for the insurance of risks situated in the otherContracting State, otherwise than through a permanent establishment situated in that otherState, the income or profits derived by the enterprise from the insurance of those risksshall in that other State not exceed 10 percent of the gross premiums paid for theinsurance of those risks.

The old paragraph (6) read as follows:

(6) Nothing in this Article shall prevent either Contracting State from taxing accordingto its law the income or profits from the business of any form of insurance.