[World Tax News] NZ Thin-Cap | Taiwan Relief | HK Minimum Tax and More

Editorial Team – [2025] 174 taxmann.com 860 (Article)

World Tax News provides a weekly snippet of tax news from around the globe. Here is a glimpse of the tax happening in the world this week:

1. NZ proposes thin capitalisation reforms to attract infrastructure investment

New Zealand Inland Revenue has released an issues paper for public consultation on potential amendments to its thin capitalisation rules, aimed at encouraging foreign investment in infrastructure. Two reform options are being considered:

(a) Targeted Rule for Infrastructure

This rule would allow full interest deductibility for third-party debt used to fund eligible infrastructure projects in NZ, subject to key conditions:

• The project must create or upgrade long-term assets (10+ years lifespan) in NZ;
• Assets must be constructed after a set date (e.g., 1 April 2026);
• The debt must be from an unrelated third party, with recourse limited to the project;
• The debt must not be on-lent (except minor incidental lending); and
• The project’s interest, assets, and income must arise in NZ.

Interest on non-qualifying debt (e.g., loans to related parties) would not be deductible. The rule may apply per project or to qualifying project portfolios, and would be elective. It targets entities controlled by a single non-resident, certain partnerships, and NZ residents subject to outbound thin cap rules.

(b) General Third-Party Debt Rule

Modelled after Australia’s new test, this broader rule would apply based on debt characteristics rather than sector. Interest would be fully deductible only if:

• The lender is an unrelated third party.
• Recourse is limited to NZ assets.
• Funds are used solely for NZ business activities; and
• The borrower is a NZ resident.

This test would be optional and apply at the NZ group level. It would not permit deductibility for related-party debt, foreign-asset-backed debt, or debt used for offshore activities. Groups may alternate between this test, the 60% safe harbour, or the 110% worldwide group debt test annually.

Inland Revenue prefers the targeted rule but invites feedback on both approaches. Submissions close on 19 June 2025.

Source – Official Issue Paper

2. Taiwan offers interest-free extension of Income tax payment amid U.S. tariff impact

Taiwan’s Ministry of Finance allows taxpayers affected by U.S. tariffs to apply for an interest-free extension or instalment plan if unable to pay taxes in full during the income tax filing period. Applications are open until June 30, 2025, and must include documents that demonstrate financial hardship (e.g., reduced income, job loss, or reduced working hours).

Submission can be made in person, by mail, or online via the e-Filing and Tax Payment Service or eTax Portal. Approved extensions may last up to one year, or up to 36 monthly instalments over three years, interest-free, based on the tax amount owed.

Source – Ministry of Finance

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