U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

1 

79–112 

" ! SENATE 

111TH CONGRESS

1st Session 

TREATY DOC. 

2009

111–3 

PROTOCOL AMENDING TAX CONVENTION WITH NEW 

ZEALAND 

MESSAGE 

FROM

THE PRESIDENT OF THE UNITED STATES 

TRANSMITTING

PROTOCOL AMENDING THE CONVENTION BETWEEN THE UNITED 

STATES OF AMERICA AND NEW ZEALAND FOR THE AVOIDANCE 

OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME, SIGNED ON DECEMBER 1, 2008, AT WASHINGTON 

JUNE 16, 2009.—Treaty was read the first time, and together with the 

accompanying papers, referred to the Committee on Foreign Relations 

and ordered to be printed for the use of the Senate 


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(III)

LETTER OF TRANSMITTAL 

THE WHITE HOUSE, June 16, 2009 

To the Senate of the United States: 

I transmit herewith, for the advice and consent of the Senate to 

its ratification, the Protocol Amending the Convention between the 

United States of America and New Zealand for the Avoidance of 

Double Taxation and the Prevention of Fiscal Evasion With Respect to Taxes on Income, signed on December 1, 2008, at Washington (the ‘‘proposed Protocol’’). I also transmit for the information 

of the Senate the report of the Department of State, which includes 

an Overview of the proposed Protocol. 

This proposed Protocol provides for the elimination of withholding taxes on certain cross-border direct dividend payments and 

on cross-border interest payments to certain financial enterprises. 

The proposed Protocol reduces the existing Convention’s 10-percent 

limit on withholding taxes on cross-border payments of royalties to 

5 percent. 

The proposed Protocol contains a comprehensive provision designed to prevent ‘‘treaty shopping,’’ which is the inappropriate use 

of a tax treaty by third-country residents. The proposed Protocol 

also provides for the exchange of information between tax authorities of the two countries to facilitate the administration of each 

country’s tax laws. 

I recommend that the Senate give early and favorable consideration to the proposed Protocol and give its advice and consent to 

ratification. 

BARACK OBAMA. 


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(V)

LETTER OF SUBMITTAL 

DEPARTMENT OF STATE, 

Washington, May 21, 2009. 

The PRESIDENT, 

The White House. 

THE PRESIDENT: I have the honor to submit to you the Protocol 

Amending the Convention between the United States of America 

and New Zealand for the Avoidance of Double Taxation and the 

Prevention of Fiscal Evasion with Respect to Taxes on Income, 

signed on December 1, 2008, at Washington (the ‘‘proposed Protocol’’). The proposed Protocol was negotiated to bring the existing 

income tax Convention with New Zealand (the ‘‘existing Convention’’) into closer conformity with current U.S. tax treaty policy, 

and in recognition of the importance of the United States’ economic 

relations with New Zealand. I recommend that the proposed Protocol be transmitted to the Senate for its advice and consent to 

ratification. 

The proposed Protocol provides for the elimination of withholding 

taxes on certain cross-border direct dividend payments and on 

cross-border interest payments to certain financial enterprises. It 

reduces the existing Convention’s 10-percent limit on withholding 

taxes on cross-border payments of royalties to 5 percent. 

The proposed Protocol contains a comprehensive provision designed to prevent ‘‘treaty shopping,’’ which is the inappropriate use 

of a tax treaty by third-country residents. It also provides for the 

exchange of information between tax authorities in the two countries to facilitate the administration of each country’s tax laws. An 

overview of key provisions of the proposed Protocol is enclosed with 

this report. 

The proposed Protocol is self-executing. The Department of the 

Treasury and the Department of State cooperated in the negotiation of the proposed Protocol, and the Department of the Treasury 

joins the Department of State in recommending that the proposed 

Protocol be transmitted to the Senate as soon as possible for its advice and consent to ratification. 

Respectfully submitted. 

HILLARY RODHAM CLINTON. 

Enclosures: as stated. 


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(VII)

OVERVIEW

The Protocol amending the income tax Convention with New 

Zealand (proposed Protocol) was negotiated to bring the existing 

Convention, concluded in 1982 (existing Convention), into closer 

conformity with current U.S. tax treaty policy. There are, as with 

all bilateral tax conventions, some variations from these norms. In 

the proposed Protocol, these differences reflect particular aspects of 

New Zealand law and treaty policy, the interaction of U.S. and 

New Zealand law, and U.S.-New Zealand economic relations. 

TAXATION OF INVESTMENT INCOME

The withholding tax rates on investment income in the proposed 

Protocol are generally the same as or lower than those in the existing Convention. The proposed Protocol reduces or eliminates 

source-country taxation of dividends distributed by a company resident in one Contracting State to a resident in the other Contracting State. More specifically, the proposed Protocol provides for 

the elimination of source-country taxation of certain direct dividends (i.e., where an 80 percent ownership threshold is met). The 

proposed Protocol also generally allows for taxation at source of 5 

percent on dividends when a 10 percent ownership threshold is 

met, and 15 percent on all other dividends. 

The proposed Protocol updates the treatment of dividends paid 

by U.S. Regulated Investment Companies and Real Estate Investment Trusts to prevent the inappropriate use of those structures to 

avoid U.S. withholding taxes on outbound dividends. 

The proposed Protocol eliminates source-country taxation of interest paid to banks and certain other financial enterprises when 

the payer of the interest is not a related party. Consistent with current U.S. tax treaty policy, source-country tax maybe imposed on 

certain contingent interest and payments from a U.S. Real Estate 

Mortgage Investment Conduit. 

The proposed Protocol reduces the existing Convention’s 10 percent limit on source-country withholding tax on cross-border payments of royalties to 5 percent. 

TAXATION OF BUSINESS INCOME

The proposed Protocol preserves the U.S. right to impose its 

branch profits tax on U.S. branches of New Zealand corporations. 

The proposed Protocol also accommodates a provision of existing 

U.S. domestic law that attributes to a permanent establishment income that is earned during the life of the permanent establishment 

but is not received until after the permanent establishment no 

longer exists. 


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VIII

TAXATION OF PERSONAL SERVICES INCOME

The proposed Protocol replaces the existing Convention’s rules 

regarding the taxation of independent personal services by individuals. Under the proposed Protocol, an individual performing services in the other country will become taxable in the other country 

only if the individual has a fixed place of business in that country. 

ANTI-ABUSE PROVISIONS

The proposed Protocol replaces the existing Convention’s ‘‘Limitation on Benefits’’ article with a comprehensive and modernized provision that is consistent with current U.S. tax treaty practice. The 

updated provision is designed to address ‘‘treaty shopping,’’ which 

is the inappropriate use of a tax treaty by third-country residents. 

The proposed Protocol incorporates updated rules that provide 

that a former citizen or long-term resident of the United States 

may, for the period of ten years following the loss of such status, 

be taxed in accordance with the laws of the United States. The proposed Protocol also coordinates the U.S. and New Zealand tax rules 

to address the new U.S. ‘‘mark-to-market’’ provisions that apply to 

individuals who relinquish U.S. citizenship or terminate long-term 

residency. 

EXCHANGE OF INFORMATION

The proposed Protocol replaces the existing Convention’s tax information exchange provisions with updated rules that are consistent with current U.S. tax treaty practice. The proposed Protocol 

allows the tax authorities of each country to exchange information 

relevant to carrying out the provisions of the Convention or the domestic tax laws of either country. The proposed Protocol allows the 

United States to obtain information (including from financial institutions) from New Zealand whether or not New Zealand needs the 

information for its own tax purposes. 

ENTRY INTO FORCE

The proposed Protocol will enter into force on the date of the 

later note in an exchange of diplomatic notes in which the Parties 

notify each other that their respective applicable procedures for 

ratification have been satisfied. It will have effect, with respect to 

taxes withheld at source, for amounts paid or credited on or after 

the first day of the second month next following the date on which 

the proposed Protocol enters into force. With respect to other taxes, 

the proposed Protocol will have effect in the United States for taxable years beginning on or after the first day of January next following the date upon which the proposed Protocol enters into force, 

and in New Zealand for taxable years beginning on or after the 

first day of April next following the date on which the proposed 

Protocol enters into force. The provisions of the proposed Protocol 

on exchange of information, however, will have effect from the date 

of entry into force of the proposed Protocol. 


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