New Zealand/Finland Protocol: Addition to the Double Taxation Relief (Finland) Order 1984

This commentary item was published in Public Information Bulletin Volume 179, May 1989

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A protocol to the 1984 Finland Double Taxation Convention was signed in Helsinki on 5 December 1986.

The purpose of the protocol is to include a Non-Discrimination Article to prevent discrimination on the grounds of nationality.

Paragraph 1 establishes the principle that for taxation purposes discrimination on the grounds of nationality is forbidden. The paragraph prevents a State from imposing any more burdensome taxation or connected requirement on nationals of the other State than it imposes on its own nationals in the same circumstances.

Paragraph 2 requires non-residents trading through a permanent establishment to be taxed no less favourably than a resident who carries on the same activities.

Paragraph 3 is designed to end a particular form of discrimination resulting from the fact that in certain countries the deduction of interest, royalties and other disbursements, allowed without restriction when the recipient is resident, is restricted or even prohibited when he/she is a non-resident.

Paragraph 4 prevents discrimination against enterprises which are wholly or partly owned by residents of the other State, e.g., a New Zealand subsidiary of a Finland Company. This has no practical effect in New Zealand - we do not discriminate against such enterprises.

Paragraph 5 provides that this Article shall not apply to any provision in taxation laws which:

1. is reasonably designed to prevent or defeat the avoidance or evasion of taxes; or
2. is in force in New Zealand and Finland on 5 December 1986 and any subsequent laws which have substantially similar purpose or intent.

Provided that Finland/New Zealand does not give greater benefits to residents or citizens of third countries than to residents or citizens of Finland/New Zealand.

Paragraph 6 ensures that New Zealand may continue to distinguish in its taxation laws between residents and non-residents, e.g., grant to New Zealand residents, rebates and special exemptions which do not extend to non-residents, or impose non-resident withholding tax on dividends paid by a New Zealand Company to a Finnish Company.

Paragraph 7 restricts the scope of the Article to those taxes covered by the Convention.

The protocol entered into force on 8 May 1988 and will have effect in New Zealand for any income year beginning on or after 1 April 1989 and in the case of Finland from 1 January 1989.