India-New Zealand DTAA: Complete Guide to the Double Taxation Avoidance Agreement

Quick answer: The India-New Zealand DTAA caps dividends at a flat 15% (no shareholding tiers), and interest, royalties, and fees for technical services (FTS) all at 10%. Signed at Auckland on 17 October 1986, in force from 3 December 1986, it was rewritten by a Second Protocol effective 1 April 2000, cutting rates from 20%/15%/30%. It has no services PE clause, gives the source State an unconditional right to tax most share-sale gains, and relieves aircraft profits in full while capping shipping relief at only 50%.

Key takeaways:

• Dividends 15% flat, interest 10%, royalties and FTS 10% — set by the Second Protocol from 1 April 2000
• No services PE clause; a natural-resources deemed PE applies with no time threshold
• Article 13(5) gives India an unconditional right to tax a New Zealand resident's share gains, no minimum-holding test
• Air transport is fully residence-only (Article 8); shipping gets only 50% relief (Article 8A)
• A Covered Tax Agreement under the MLI: the PPT applies, and the MLI replaces the Article 4(3) tie-breaker and Article 13(4) land-rich test

Overview of the India-New Zealand DTAA

The Double Taxation Avoidance Agreement (DTAA) between India and New Zealand prevents the same income being taxed twice. The Convention was signed at Auckland on 17 October 1986, entered into force 3 December 1986, with effect for previous/income years beginning on or after 1 April 1987 (Article 28), notified in India by G.S.R. 314(E), 27 March 1987.

The Income Tax Department's own page header prints "Date of Signature 1987" — the notification year, not the signature date. The treaty covers, for New Zealand, "the income-tax and the excess retention tax," and for India, "the income-tax including any surcharge thereon and the surtax" (Article 2); there is no separate wealth or capital-tax article. The consolidated treaty text is on the Income Tax Department's website.

Treaty History: The Convention and Its Three Protocols

Three protocols have amended the 1986 Convention, and it matters which one a reader relies on for rates:

• First Protocol — 29 August 1996; in force 9 January 1997; effective 1 February 1997. Added an anti-abuse limb to New Zealand's tax-sparing credit (below); no rate changes.
• Second Protocol — 21 June 1999; in force 30 December 1999; effective from 1 April 2000. Set every current rate: dividends "20 per cent" replaced by "15 per cent" (Art 10(2)); interest "15 per cent" replaced by "10 per cent" (Art 11(2)); royalties/FTS "30 per cent" replaced by "10 per cent" (Art 12(2)). Also rewrote the Article 4(3) tie-breaker for non-individuals.
• Third Protocol — 26 October 2016; in force 7 September 2017. Replaced Article 26 (Exchange of Information) with the OECD standard and inserted Article 26A (Assistance in Collection of Taxes). No rate, capital-gains, or anti-abuse changes.

Anyone quoting 20% dividends, 15% interest, or 30% royalties/FTS for this treaty is quoting the historical, superseded figures — the current rates below have applied since 1 April 2000.

Residence and the Tie-Breaker Rule

Article 4(1) defines a resident by domicile, residence, place of management, "or any other criterion of a similar nature." Dual-resident individuals apply the standard cascade at Article 4(2): permanent home, then centre of vital interests, then habitual abode, then nationality, with unresolved cases going to the competent authorities.

For companies and other non-individuals, Article 4(3) as substituted by the Second Protocol originally assigned residence to the entity's place of effective management. The MLI has since replaced this rule: both India and New Zealand notified Article 4(3) under MLI Article 4(4), so a dual-resident company or trust gets no automatic answer — the competent authorities must reach case-by-case agreement, and without agreement there is no treaty relief on the affected income. New Zealand's Inland Revenue confirms this: a dual-resident company "may need to apply to a competent authority to determine the country ... in which you're resident for tax treaty purposes," and failing to do so "can result in the loss of benefits under a DTA."

Permanent Establishment Rules

Article 5(1)-(2) defines a permanent establishment (PE) as a fixed place of business, listing UN-style deemed PEs including "a warehouse in relation to a person providing storage facilities for others," a farm or plantation, and "premises used as a sales outlet."

Construction PE — six months, broadly aggregated

A building site, construction, installation or assembly project, "or supervisory activities in connection therewith," becomes a PE if it continues more than six months (Article 5(2)(j)) — aggregating "other such sites or projects or activities, if any, or any combination thereof," unusually wide language.

No services PE

Unlike India's treaties with the US, UK, or Singapore, Article 5 has no furnishing-of-services clause — no 90-day or 183-day services test. Cross-border services fall instead under Article 12 as fees for technical services (FTS) at 10%, or under Article 7 if a fixed-place or agency PE otherwise exists.

Natural resources and agency PE

Article 5(2)(k) lists "an installation or structure for the exploration or exploitation of natural resources," and the proviso to Article 5(2) goes further, deeming a PE wherever an enterprise carries on activities "in connection with the exploration or exploitation of natural resources" — with no minimum-duration test, broader than the "mineral oils" clauses in several other India treaties. The agency PE (Article 5(4)) originally covered only (a) habitual contract-concluding authority, or (b) a stock from which the agent regularly delivers goods — there is no "habitually secures orders" limb. The MLI adds a layer: both countries notified Article 5(4)(a) and the Article 5(5) independent-agent exclusion under MLI Articles 12(5)-(6), so an agent who "habitually plays the principal role leading to the conclusion of contracts" now creates a PE, and the independent-agent exclusion is lost for an agent acting almost exclusively for closely related enterprises; the stock-and-delivery limb is untouched. The MLI's Option A (adopted by both countries) also confines every Article 5(3) preparatory/auxiliary exclusion to genuinely preparatory or auxiliary activity.

Business Profits and the Partial Force of Attraction

Article 7(1) taxes business profits only in the residence State unless there is a PE in the other State — but it also attributes to the PE profits from "(b) sales in that other State of goods or merchandise of the same or similar kind as those sold through that permanent establishment." This limited force-of-attraction rule has no avoidance-purpose qualifier, reaching ordinary same-line sales made directly by the head office once a PE for that product line exists in the other State.

Dividends, Interest, Royalties and Fees for Technical Services

Full withholding tax mechanics and worked examples are in our India to New Zealand withholding tax guide; the summary below states each treaty rule.

Dividends — Article 10

Article 10(2) caps dividends at a flat 15% of the gross amount, with no shareholding tier — 15% applies whether the New Zealand holding is 1% or 100%. This is one of the less favourable dividend caps among India's treaties, with no MFN clause to import a better rate.

Interest — Article 11, an asymmetric exemption

Article 11(2) caps ordinary interest at 10%, no bank tier. Article 11(3) exempts interest entirely where beneficially owned by the Government, a political subdivision, local authority, or the Central Bank of the other State, or — asymmetrically — "in the case of India, the Export Import Bank of India; in the case of New Zealand, any financial institution agreed to be of a similar nature ... by the competent authorities." India names a specific institution; New Zealand names nobody and needs a fresh competent-authority agreement. The Reserve Bank of New Zealand qualifies only as the Central Bank under limb (ii). There is no payer-side or guaranteed-loan exemption — ordinary commercial lending sits at 10%.

Royalties and FTS — a single Article 12

Royalties and FTS share one article, both capped at 10% under Article 12(2). The royalty definition (12(3)) is OECD-style plus an equipment-royalty limb — "the use of, or the right to use, industrial, commercial, or scientific equipment" — and covers cinematograph films and television/radio tapes. The FTS definition (12(4)) has no make-available test: it covers "services of a managerial, technical or consultancy nature, including the provision of services of technical or other personnel," excluding only the payer's own employee and an individual's Article 14 services. Secondment of personnel and management fees both sit inside FTS at 10%.

Shipping and Air Transport

Articles 8 and 8A treat international transport differently. Air transport (Article 8) is fully residence-only: aircraft profits "shall be taxable only" in the operator's home State. Shipping (Article 8A) gets only half relief: Article 8A(2) lets the source State tax its share of shipping profits, "but the tax so imposed shall not exceed 50 per cent of the tax which would have been chargeable ... in the absence of this Convention." Article 8A(4) extends the same treatment to profits from the use, maintenance or rental of containers used in international traffic.

Capital Gains

Article 13 assigns taxing rights paragraph by paragraph:

Article 13(5) is unusually broad: any gain on shares of a resident company "may be taxed in that State," so India retains the right to tax a New Zealand resident's gain on Indian-company shares in essentially every case, with no minimum-holding carve-out. The MLI has replaced Article 13(4): both countries notified it under MLI Article 9(4)/9(8), so the open-ended "principally" test is now a hard rule — shares or comparable interests, "including interests in a partnership or trust," are taxable at source if at any time during the 365 days preceding the sale they derived more than 50% of their value from immovable property there. There is no grandfathering clause in this treaty.

Where India retains the taxing right, the current domestic rate depends on the asset: short-term gains on listed shares at 20% under section 196 of the Income-tax Act, 2025 (section 111A of the Income-tax Act, 1961); long-term gains on listed shares above INR 1.25 lakh at 12.5% under section 198 (section 112A of the 1961 Act); and long-term gains on unlisted shares — the more common case for a New Zealand investor exiting an Indian subsidiary — at 12.5% without indexation under section 197 (section 112 of the 1961 Act).

Other Income and Elimination of Double Taxation

Article 22 ("Other Income") follows the Indian-model approach, not OECD residence-only: income not dealt with elsewhere may also be taxed at source under Article 22.

Both countries relieve double taxation by the ordinary credit method (Article 23(1)-(2)) — neither uses exemption. New Zealand alone adds Article 23(3) tax sparing, deeming "Indian tax paid" to include tax spared under specified Indian incentives, capped at the lower of New Zealand tax otherwise payable and the treaty rate limit — qualified by the First Protocol's anti-abuse override, with no fixed sunset year.

Anti-Abuse Rules and the Multilateral Instrument

The 1986 Convention has no Limitation on Benefits (LOB) article; its anti-abuse architecture rests on beneficial-ownership tests in Articles 10-12 and Article 24(5) (Second Protocol), which carves domestic anti-avoidance rules out of the non-discrimination article. Above that sits the Multilateral Instrument (MLI): both India (in force here from 1 October 2019) and New Zealand (from 1 October 2018) listed each other, making this a Covered Tax Agreement, so the Principal Purpose Test applies, denying a benefit where obtaining it was a principal purpose of an arrangement. India adopted the Simplified LOB but New Zealand did not, and the MLI requires both sides to opt in — so no LOB test applies here; the PPT is the sole gatekeeper, alongside India's domestic GAAR (Chapter XI, section 159(6) override).

How to Claim Treaty Benefits

Step 1: New Zealand certificate of tax residency

The Article 3 competent authority is the Commissioner of Inland Revenue, which issues "a certificate of New Zealand tax residency" — individuals apply via myIR; entities and trusts submit the required information directly. There is no numbered form equivalent to a US Form 6166.

Step 2: Form 41 (formerly Form 10F)

The non-resident must electronically file Form 41 (formerly Form 10F) on the Indian portal, since treaty relief at source is not automatic without it, giving status, nationality, tax identification number, and period of residence.

Step 3: Self-declaration and payer compliance

A self-declaration of beneficial ownership and no Indian PE supports the reduced rate. The Indian payer withholds under section 393(2) of the Income-tax Act, 2025 (Table, Sl. No. 17; section 195 of the Income-tax Act, 1961), filing Forms 145 and 146 (formerly 15CA/15CB) before remitting — Form 146 required only for a taxable remittance above INR 5 lakh made without a section 395 certificate — plus Form 48 (formerly Form 3CEB) for payments to a New Zealand associated enterprise.

Step 4: Lower withholding certificate

Where the rate is uncertain, apply under section 395(1) (section 197 of the Income-tax Act, 1961) for a certificate specifying the correct rate in advance.

Worked Example

A New Zealand company licenses software to its Indian subsidiary for a royalty of NZD 200,000 (about INR 1,00,00,000 at an illustrative INR 50/NZD), no Indian PE. Domestically, section 207(2) (Table, Sl. No. 1) of the 2025 Act (section 115A of 1961) applies 20% withholding — INR 20,00,000. Under Article 12(2), having furnished its residency certificate and Form 41, the subsidiary instead withholds 10% — INR 10,00,000 — filing Forms 145/146 and Form 48 (associated enterprises) before remitting the balance. The parent then credits the Indian tax paid against its own New Zealand liability under Article 23(1).

Common Mistakes

• Quoting pre-2000 rates (20%/15%/30%) instead of the current 15%/10%/10%, in force since 1 April 2000.
• Assuming a shareholding-based dividend tier — Article 10(2) is a single flat 15% cap.
• Naming a specific New Zealand interest-exemption institution without the required competent-authority agreement under Article 11(3)(iii).
• Treating shipping and aircraft alike — aircraft is fully exempt (Article 8); shipping is only half-relieved (Article 8A(2)).
• Applying a services-PE day count that this treaty does not contain.
• Assuming the Article 4(3) POEM tie-breaker still governs dual-resident companies — the MLI replaced it with competent-authority agreement.

Frequently Asked Questions

What is the withholding tax rate on dividends under the India-New Zealand DTAA?

Article 10(2) caps Indian withholding on dividends paid to a New Zealand beneficial owner at a flat 15% of the gross amount. There are no shareholding-based tiers and no lower rate for substantial holdings — 15% applies whether the New Zealand recipient holds 1% or 100% of the Indian company. This is higher than the 10% dividend rate found in many of India's newer treaties, and there is no most-favoured-nation clause to import a better rate.

Does the India-New Zealand DTAA have a services permanent establishment clause?

No. Article 5 lists a fixed place of business, several UN-style deemed PEs (warehouse, farm, sales outlet, a six-month construction/supervisory threshold), and a natural-resources deemed PE with no time test at all, but it contains no furnishing-of-services clause and no 90-day or 183-day services test. Cross-border services are instead generally taxed as fees for technical services under Article 12 at 10% of the gross amount, unless a fixed-place or agency PE otherwise exists.

How does the MLI change the India-New Zealand DTAA?

Both countries listed each other, so the treaty is a Covered Tax Agreement and the Principal Purpose Test applies. The MLI also replaces the Article 4(3) place-of-effective-management tie-breaker for dual-resident companies with case-by-case competent-authority agreement, replaces the Article 13(4) land-rich share test with a 50%-of-value/365-day look-back rule extended to partnership and trust interests, and rewrites the agency permanent establishment rule. New Zealand did not opt into the Simplified Limitation on Benefits, so no LOB provision applies to this treaty.

How are capital gains on shares taxed under the India-New Zealand DTAA?

Article 13(5) gives the source State an unconditional right to tax gains on shares of a company resident there, with no minimum-shareholding threshold and no land-rich test — so India can tax a New Zealand resident's gains on Indian-company shares at domestic capital-gains rates in almost every case. Land-rich company shares are separately covered by Article 13(4), which the MLI replaces with a 50%-of-value test measured over the 365 days before the sale.

Are shipping and aircraft profits treated the same way under this treaty?

No, and this is one of the treaty's most distinctive features. Article 8 gives aircraft profits full residence-only relief — India cannot tax a New Zealand airline's international-traffic profits at all. Article 8A treats shipping differently: India may tax the New Zealand-derived share of shipping profits, but the tax charged cannot exceed 50% of what would otherwise be chargeable, so shipping profits get only half relief, not full exemption.

What documents does a New Zealand resident need to claim treaty benefits in India?

A certificate of New Zealand tax residency from Inland Revenue (the competent authority named in Article 3), electronically filed Form 41 (formerly Form 10F) giving status, tax identification number and period of residence, and a self-declaration of beneficial ownership and no Indian PE. The Indian payer must file Form 145 (formerly Form 15CA) before remitting, adding a Chartered Accountant's certificate on Form 146 (formerly Form 15CB) only for a taxable remittance above INR 5 lakh made without a section 395 certificate.