Migration tax clampdown

The Government will legislate to ensure companies that migrate pay all the tax they owe before they go, says Finance Minister Michael Cullen.

The change is intended to remove incentives for companies to migrate for tax reasons.

Migration in this context meant no longer living in New Zealand for tax purposes, Cullen said.

Generally that meant the company was no longer incorporated here, did not have its head office or centre of management here and was not controlled by directors here.

"Under present law, companies can leave without necessarily having paid tax on all the income they earned while resident here," Cullen said.

"The change will put migrating companies on a par with liquidating companies. When they migrate, companies will be deemed to have been liquidated at that point and to have paid a dividend to shareholders on which they must withhold tax."

It will be deemed to have disposed of all assets and liabilities and realised them at market value.

The law change will be included in the next tax bill to be introduced into Parliament and will take effect from yesterday.