As of 1 January 2025, New Zealand began implementing the OECD’s GloBE (Global Anti-Base Erosion) Rules, a key part of Pillar Two global minimum tax, a game-changer for internationally active SMEs and holding companies. If your business has cross-border operations, you might now face minimum effective tax rate scrutiny that could significantly impact your tax strategy and compliance obligations.
This isn’t just another regulatory update to file away. The GloBE Rules represent one of the most substantial changes to international taxation in decades, and even smaller firms with overseas subsidiaries or holding structures need to understand what this means for their operations.
What are the GLoBE Rules?
The Global Anti-Base Erosion Rules form the cornerstone of the OECD’s Pillar Two initiative, designed to establish a global minimum corporate tax rate of 15%. The primary purpose is to stabilise the global tax system by preventing multinational enterprises from shifting profits to low-tax jurisdictions.
Under these rules, if a multinational group’s effective tax rate falls below 15% in any jurisdiction, the home country can impose a “top-up tax” to bring the rate up to the minimum threshold. This creates a floor beneath which corporate tax rates cannot effectively fall, regardless of local tax incentives or structures.
The rules apply a comprehensive approach, looking at the substance of business operations rather than just legal structures. This means your group’s tax planning strategies will need thorough review to ensure they align with the new requirements.
Which New Zealand Entities Are Affected?
Not every business needs to worry about GloBE Rules immediately. The scope is primarily determined by your group structure and annual turnover.
The rules apply to multinational enterprise groups with combined annual revenues of €750 million or more in at least two of the four fiscal years immediately preceding the tested year. This threshold aligns with existing Country-by-Country Reporting requirements, creating consistency across international tax compliance obligations.
For New Zealand entities, this includes:
• Local subsidiaries of large multinational groups
• New Zealand parent companies with overseas operations exceeding the threshold
• Holding companies that form part of qualifying multinational structures
Even if your business falls below the revenue threshold currently, it’s worth monitoring your growth trajectory. Mergers, acquisitions, or rapid expansion could bring you within scope sooner than expected.
Technical Challenges you’ll Face
Implementing GloBE compliance presents several complex technical hurdles that require careful planning and robust systems.
Data Collection and Management
The rules demand extensive financial data from every jurisdiction where your group operates. You’ll need to collect information on revenues, profits, taxes paid, and various adjustments on a country-by-country basis. This requires coordination across multiple entities, potentially in different time zones with varying accounting standards.
Calculating Effective Tax Rates
The GloBE effective tax rate calculation involves numerous adjustments to standard accounting profits and tax expenses. These adjustments can include timing differences, permanent differences, and specific GloBE adjustments that differ from traditional tax calculations. The complexity increases significantly for groups with diverse operations across multiple jurisdictions.
Intercompany Accounting Complexities
Groups with extensive intercompany transactions face particular challenges. Transfer pricing policies, intercompany financing arrangements, and cost allocation methods all impact the GloBE calculations. Ensuring consistency across jurisdictions whilst maintaining arm’s length principles adds another layer of complexity to your compliance obligations.
Your Next Steps
Taking action now will help you navigate these changes smoothly and avoid compliance issues down the track.
Audit Your Data Systems
Review your current financial reporting systems to identify gaps in the data required for GloBE calculations. Many businesses discover their existing systems cannot easily produce the jurisdictional breakdowns needed for compliance. Consider whether system upgrades or additional data collection processes are necessary.
Model the Impact
Work with your advisors to model how the GloBE Rules might affect your group’s effective tax rates across different jurisdictions. This analysis will help identify potential top-up tax liabilities and inform strategic decisions about your group structure and operations.
Engage with Tax Advisors
The technical complexity of GloBE Rules makes professional guidance essential. Your tax advisors can help interpret the rules’ application to your specific circumstances, identify planning opportunities, and ensure your compliance approach meets all requirements.
Preparing for Success
The GloBE Rules implementation marks a fundamental shift in international taxation. While the changes present challenges, businesses that prepare thoroughly can navigate them successfully whilst maintaining competitive tax strategies.
At Moore Markhams, we understand the complexities facing New Zealand businesses as they adapt to these new international tax requirements. Our team combines deep technical expertise with practical experience helping businesses implement complex compliance frameworks.
We’re offering comprehensive GloBE readiness assessments to help you understand your obligations and develop an implementation roadmap tailored to your business needs. Contact us here to discuss how we can support your business through this significant regulatory change.
