The Big Picture: Digital Tax

The Big Picture Digital Tax

SEPTEMBER 2025

Contents

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From taxing the digital platform economy to data centres

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Cross-border software payments

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The platform economy

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What’s coming up?

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GST on remote services and low value goods

08

Crypto asset disputes

15

International tax on digital businesses

09

Data centres

17

Remote working and taxable presence risks

10

Our practice

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Dependent agents and digital nomads

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Our tax team

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The Big Picture Digital Tax

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Digital businesses and digital asset holders operating in New Zealand must navigate an evolving tax landscape, with frequent tax reform driven by tax base protection concerns and tempered enthusiasm for international measures targeting digital businesses.

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The Big Picture Digital Tax

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From taxing the digital platform economy to data centres Tax is a key consideration for digital business and those holding digital assets.

New Zealand has abandoned its unilateral digital services tax but continues to mull the challenges of taxing the digital economy. Meanwhile, targeted legislative changes are impacting digital platform businesses operating in New Zealand, and new reporting regimes are in force.

Data centre development in New Zealand is accelerating, with related tax issues gaining greater prominence. The tax aspects of New Zealand’s recently introduced digital nomad visa programme are in focus, including tax residence

considerations and permanent establishment risks.

Inland Revenue is looking to modernise its guidance on the tax treatment of crossborder software payments, and continues with enforcement activity for digital asset disposals, including cryptoassets.

In The Big Picture: Digital Tax we unpack the key New Zealand tax considerations impacting digital business and digital assets.

We take a look at the key reforms and trends, and what lies ahead for the digital sector.

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The Big Picture Digital Tax

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The platform economy Income reporting rules The OECD’s platform economy reporting rules came into effect in New Zealand on 1 January 2024. These rules require online marketplace operators that are New Zealand tax residents to collect and report information about “reportable sellers” who provide “relevant services” through their platforms.

A reportable seller is any individual or entity that registers with an online marketplace to offer a relevant service. This excludes sellers that are listed companies and businesses with more than 2,000 nights of accommodation listed in a 12-month period.

Relevant services include the rental of immovable property, such as carparks, and short-stay/visitor accommodation. They also include personal services, which are time or task-based services performed at the request of a buyer such as ridesharing, food and beverage delivery, and graphic/web design services.

Marketplace operators must report the following information about reportable sellers:

Sellers who are individuals

Sellers who are entities

First and last name

Legal name

Date of birth and primary address

Primary address

Jurisdiction(s) of tax residence

Jurisdiction(s) of tax residence

Taxpayer Identification Number (TIN) and the jurisdiction that issued it (e.g. the IRD number for a New Zealand tax resident).

TIN and the jurisdiction that issued it Business registration number (e.g. the NZBN for New Zealand companies)

Sellers of immovable property (individuals and entities)

All sellers (individuals and entities)

Address of each property listing

Total income or consideration paid/credited

Land registration number (if known)

Number of relevant activities performed which that consideration relates to

Number of days each property listing was rented during the year

Fees, commissions or taxes withheld or charged

The type of each property listing (e.g., apartment, parking space) under XML schema categories, if known.

Financial account identifier, if available.

Name of financial account holder receiving payment or credit

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The platform economy Data collection — and compliance costs Online marketplace operators must register for a digital platform information account with Inland Revenue and report through that account by 7 February of each tax year. The first tranche of data was collected on 7 February 2025.

Specific formatting requirements must be followed. The information must: 1.

2.

3.

Be presented in quarterly periods.

Use the OECD XML Schema framework.

Be submitted using and XML file upload or an Excel template.

This method of data collection is relatively new to the New Zealand tax system and introduces an additional responsibility for marketplace operators to ensure the information provided is valid.

We anticipate significant compliance costs associated with implementing these rules, given the sheer amount of information to be collected, verified, and reported, and the system changes needed to support this process.

Penalties may apply if an online marketplace operator fails to report the required information to Inland Revenue or provides false or misleading data.

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The platform economy GST on supplies through online marketplaces SCOPE AND APPLICATION Since 1 April 2024, the supply of “listed services” made through an online marketplace has been subject to GST when services are performed, provided or received in New Zealand, regardless of whether the supplier is GST registered.

Supplies of listed services made through an online marketplace are now subject to GST regardless of whether the supplier is GST registered.

Listed services are taxable accommodation services, ride-sharing or ride-hailing transportation services, food and beverage delivery services, and other services closely connected to the above. Online marketplace operators may be required to collect and return GST on such services if their total supply in New Zealand exceeds, or is expected to exceed, NZ$60,000 in a 12-month period.

GST OBLIGATIONS Under these rules, the online marketplace operator will be deemed the supplier if it authorises a charge, facilitates the delivery of the listed services to the customer, and sets any of the terms or conditions under which supply is made. In such cases, the online marketplace operator must collect and return GST, rather than the underlying supplier of the services.

Some GST registered suppliers with more significant operations can opt-out of these rules by notifying the relevant marketplace operator. If they opt out, the underlying supplier remains responsible for their GST obligations.

Where the supplier is not GST registered, they may either voluntarily register for GST to recover a GST credit, or opt into the flat-rate credit scheme. Under this scheme, the marketplace operator passes on 8.5% of the GST collected to the supplier as a credit, and the remaining 6.5% is paid to Inland Revenue.

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GST on remote services and low value goods In 2016, New Zealand expanded the scope of its GST regime to encompass remote services provided by offshore suppliers to New Zealand-based customers.

The term “remote services” covers any transaction that can be carried out remotely, including professional services, insurance, online subscriptions, and the provision of intellectual property.

A similar rule now applies to the sale of low-value goods to New Zealand customers, defined as goods with a customs value of NZ$1,000 or less. This requires offshore suppliers (including online suppliers) to calculate, collect, and return GST at the rate of 15% to Inland Revenue on these low value goods. An exemption is available where the New Zealand based customer is GST-registered and makes a business-related purchase.

These rules have wide-ranging impacts, requiring offshore suppliers to register for GST with Inland Revenue, reflect GST in the pricing of low value goods, and track B2B and B2C customers. The onus remains on a supplier to obtain sufficient information to determine the GST status of each customer.

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International tax on digital businesses PILLAR TWO

Unclear status

Goodbye, New Zealand Digital Services Tax

On 20 May 2025, the Government removed the Digital Services Tax Bill from its legislative programme. That bill, introduced in August 2023, proposed a 3% digital services tax on the gross digital services revenue of large multinational enterprise groups, where that revenue was connected to New Zealand users or land.

The Hon Simon Watts, the New Zealand Minister of Revenue, indicated the decision reflected New Zealand’s commitment to the OECD’s Two-Pillar multilateral solution. “A global solution has always been our preferred option, and we have been encouraged by the recent commitment of countries to the OECD work in this area,” he said in a statement (New Zealand Government, 2025 ). The Treasury New Zealand projects a tax shortfall of NZ$479 million between 2027 and 2029 due to the change.

PILLAR ONE

Uncertain future The DST Bill was intended as a contingency measure if insufficient progress was made on implementing Pillar One of the OECD’s TwoPillar multilateral solution.

Pillar One relates to the reallocation of taxing rights to market jurisdictions, allowing them to tax a share of the profits of the largest and most profitable multinational enterprises operating in their markets, regardless of their physical presence.

It remains unclear when the OECD’s Pillar One proposal will be finalised and adopted in New Zealand.

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New Zealand enacted the Pillar Two rules into domestic law in March 2024, with effect from 1 January 2025. These rules are the OECD’s solution to tax challenges arising from the digitalisation of the global economy, to ensure that multinational groups with an annual turnover of €750 million in two of the last four years pay at least 15% tax on income in each country where that income is reported.

The effectiveness of Pillar Two depends on the implementation by individual countries.

However, the withdrawal of the US has cast uncertainty over the future of Pillar Two. On 21 March 2025, US President Donald Trump withdrew from the global minimum tax initiative. Section 899 of the “One Big Beautiful Bill” proposes to impose an increased tax rate on “discriminatory foreign countries”, defined as countries imposing an “unfair foreign tax”.

An unfair foreign tax includes an undertaxed profits rule, such as a digital services tax and the Pillar Two rules. New Zealand is expected to be classed as a discriminatory foreign country due to its adoption of the OECD’s Pillar Two reforms. If implemented, the bill could materially increase tax on New Zealand residents earning income from the US.

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Remote working and taxable presence risks The creation of a New Zealand permanent establishment (PE) is an important issue to monitor for cross-border businesses. Business profits attributable to such a PE can be subject to New Zealand income tax.

A PE creates a taxable presence for an enterprise in a state that is outside of its ordinary state of residence. It can arise through the maintenance of a fixed place of business, such as a branch or office, the presence of certain dependent agents, like salespeople, or the provision of substantial in-country services.

The risk of creating a New Zealand PE has increased in recent years, due to the growing popularity of flexible working arrangements, which enable individuals to work remotely from different countries. It has never been more important for non-resident enterprises to be aware of the activities and responsibilities of remote employees, and whether those activities may give rise to a PE. This is particularly relevant for digital businesses where an enterprise may not

have a ‘physical presence’ in New Zealand, but could still be at risk of creating a New Zealand PE. In recognition of the growing popularity of flexible and remote working arrangements, with effect from 1 April 2026, the Taxation (Annual Rates for 2025–26, Compliance Simplification, and Remedial Measures) Bill (the Compliance Simplification Bill) proposes to disregard the activities of “non-resident visitors” when determining whether a nonresident has a permanent establishment or other taxable presence in New Zealand. To the extent that persons in New Zealand do not qualify as a “non-resident visitor”, the considerations outlined below in respect of home offices and dependent agents will continue to be of importance in determining whether a non-resident has a permanent establishment in New Zealand.

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Is your employee’s home office a New Zealand permanent establishment?

A digital business needs to be particularly mindful of the possibility of creating a PE in New Zealand through the home office of an employee based in New Zealand, if that office can be treated as a ‘fixed place of business’ at the disposal of their non-resident employer.

Whether a home office is at the disposal of an employer will depend on the specific facts. Relevant factors include whether the employer rents a room for the employee, reimburses rent, or compensates the employee for the use of a specific space for work purposes. Where the home office is regularly used to carry out the employer’s business activities, there is an increased risk it will constitute a PE – particularly if the employer has effectively required the employee to work from that home office (for example, by not providing alternative premises).

The Big Picture Digital Tax

A home office will generally not constitute a PE where it is used intermittently or incidentally, and/or the employer has not required the employee to work from that location because other premises are available, potentially even those in another jurisdiction. It is also possible that even where a home office is at the disposal of the employer, it could still be excluded from PE classification on the basis the activity it is used for is ‘preparatory or auxiliary’ in nature, or no profit attribution will be made to the PE due to the ‘back-office’ nature of the employee’s activities.

We understand Inland Revenue currently has a focus on the monitoring of home office PEs. The OECD is doing further work on this issue and taking feedback from various jurisdictions. We expect that this will lead to further guidance in the future, which New Zealand is likely to adopt.

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Dependent agents and digital nomads Does a dependent agent permanent establishment arise?

A dependent agent PE may arise where an employee habitually exercises authority to negotiate or conclude contracts (or in some cases, plays the principal role leading to the conclusion of contracts) on behalf of the non-resident employer while residing in New Zealand. The relevant standard for determining whether a dependent agent PE exists will depend on the jurisdiction of the enterprise and any applicable double tax agreement (DTA). To give rise to a dependent agent PE, the relevant contracts must form a core part of the enterprise’s business.

Concluding contracts that relate solely to internal operations, for example, would not be enough to constitute a PE.

What are activities of a preparatory or auxiliary character?

A PE does not arise where the fixed place of business or dependent agent is used solely to carry out activity of a preparatory or auxiliary nature for the enterprise.

An activity is considered preparatory if it is generally undertaken prior to the essential or significant part of the activity of the enterprise. An activity is auxiliary if it is carried out only to support the core business, and does not involve an essential or significant proportion of the assets or workforce of the business. Where an activity requires a significant proportion of assets or employees it will not have an auxiliary character.

Digital nomads On 27 January 2025, the New Zealand Government announced a change to immigration rules allowing tourists to work remotely for a foreign employer while visiting New Zealand.

These so-called ‘digital nomads’ can now stay in New Zealand without breaching visa conditions, and qualify for an income tax exemption under existing law. The exemption applies if an individual intends to work remotely in New Zealand for less than 92 days in a 12-month period, or less than 183 days if they are a tax resident of a country which New Zealand has a DTA with. To qualify, the individual must not earn income from a New Zealand source, or provide goods or services to New Zealand-based individuals or businesses while in the country.

If an individual intends to work remotely in New Zealand for more than 92 days (or 183 days as applicable), they may be taxed at the same rate as New Zealand tax residents on income earned from remote work performed while in New Zealand. That tax will apply from the first day they are physically present in New Zealand.

However, the Compliance Simplification Bill proposes to significantly reform the current way that certain digital nomads, defined as “non-resident visitors”, are taxed in New Zealand. These proposals apply for persons arriving in New Zealand on or after 1 April 2026 and who have not been physically

present in New Zealand prior to that date.

The tax residency tests are proposed to be reformed so that non-resident visitors would be deemed to be non-resident for New Zealand income tax purposes for up to 275 days in any 18-month period, provided that they meet certain requirements. The requirements include that they are not undertaking work in New Zealand for a New Zealand resident or a New Zealand branch of a non-resident, they are not offering goods and services in New Zealand for income from persons or businesses in New Zealand and they are not required to be physically present in New Zealand.

In addition, personal or professional services income derived by a non-resident visitor from services performed for, or on behalf of, a nonresident is generally proposed to be exempt from New Zealand income tax. All other New Zealand sourced income derived by the nonresident visitor would continue to be subject to the current tax rules. It is also proposed that non-resident visitors who only make certain zero-rated supplies to non-residents can choose not to register for GST to minimise compliance costs (but may elect to GST register to recover input tax).

A specific anti-avoidance rule can also apply to deem a PE has arisen for a large multinational enterprise, even in cases where a dependent agent PE is not created under a DTA. This can occur where relevant sales facilitation activities carried out in New Zealand are substantial enough to be regarded as “bringing about” a supply of goods or services in New Zealand.

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Cross-border software payments

The revised New Zealand guidance will be highly relevant to digital businesses, given the complex, borderline issues seen in recent times.

Inland Revenue guidance on payments to non-resident software suppliers On 29 November 2024, the Commissioner of Inland Revenue revoked policy statement IG0007, which addressed the income tax treatment of computer software transactions where payments to non-resident software suppliers were sourced in New Zealand.

The statement was considered outdated, given technological developments in the way software transactions are made.

The following May, the Government announced the development of a new policy statement, PUB00266 ‘Income tax – Payments derived from New Zealand by non-resident software suppliers’, as part of its Public Guidance work program. The policy aims to clarify how payments for supplies of computer software should be characterised – whether they are royalties, business or rental income for services, or non-taxable receipts

– and outlines the associated non-resident withholding tax and non-resident contractors’ tax (NRCT) implications.

Inland Revenue is currently reviewing issues, following the release of equivalent guidance in the US. The revised New Zealand guidance will be highly relevant to digital businesses, given the complex, borderline issues seen in recent times that have involved the withholding tax classification of software payments.

In the meanwhile, from 1 April 2026, the Compliance Simplification Bill proposes to exclude payments to non-residents for the provision of software as a service, platform as a service, or infrastructure as a service from the NRCT rules, except to the extent to which the service involves infrastructure or personnel located in New Zealand.

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Spotlight on - crypto assets Bell Gully

The Big Picture Digital Tax

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What’s coming up?

CARF will take effect on 1 April 2026 with the first reporting due to Inland Revenue by 30 June 2027. Inland Revenue intends to exchange this information with other tax authorities by 30 September 2027. Despite the time frame, Inland Revenue is already proactively engaging with many crypto asset platforms to obtain user information.

The omnibus tax amendment Act enacted in March 2025 heralded the implementation of the OECD’s Crypto-Asset Reporting Framework (CARF), which requires crypto asset service providers – such as exchanges, brokers, and dealers – to report the income earned by crypto asset users to Inland Revenue.

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Inland Revenue has increased its focus on taxpayers dealing in crypto assets who are not declaring income from those transactions. Ensuring tax compliance for crypto assets is typically challenging, due to their decentralised nature and the limited regulatory oversight of associated intermediaries. CARF has been implemented with the intention of achieving greater visibility over income derived by New Zealand tax residents from crypto asset transactions.

The Big Picture Digital Tax

What needs to be reported?

Crypto asset service providers must report the name, address, date of birth, tax identification number and aggregated transaction data for each reportable crypto asset user.

Penalties may apply to service providers who fail to comply with reporting obligations, and to users who fail to disclose the relevant information to service providers.

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Crypto asset disputes The tax treatment of crypto asset transactions remains a hot topic, with Inland Revenue having issued letters to a wide group of taxpayers advising them to declare income from their crypto transactions. Public rulings on the technical aspects of crypto asset taxation have been limited, but those that have been published offer a few key takeaways.

Tax treatment of crypto assets from blockchain forks and airdrops IRRUIP14 Inland Revenue has said the receipt and disposal of crypto assets from a hard fork are generally taxable if an individual operates a crypto asset business, acquired the crypto asset as a part of a profit-making scheme, or acquired it for the purpose of disposal.

Airdropped crypto assets may also be taxable if received or disposed of in connection with a crypto asset business, acquired in connection with a profit-making scheme, if services were provided to receive the airdrop, or if airdrops were received on a regular basis, making them akin to income. Disposal of such assets is also taxable if they were acquired for the purpose of disposal.

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A “hard fork” occurs when a change in protocol code creates a new version of a blockchain.

Participants in the original blockchain receive the equivalent value of a new crypto asset, in the new blockchain. An “airdrop” is a free distribution of tokens, typically made to increase awareness of that token.

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Salary and wages paid in crypto assets BR PUB 23/04 Remuneration regularly paid to employees in the form of crypto assets may lead to the crypto asset being treated as salary or wages and subject to PAYE rules. Crypto assets are not technically ‘money’ (although they share some of the same characteristics), but Inland Revenue considers PAYE rules broad enough to include such nonmonetary payments.

However, not all crypto assets will be subject to PAYE. To be treated as ‘salary’ or ‘wages’ the crypto assets must be freely convertible to a fiat currency and not be subject to a lock-up period.

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Crypto asset disputes

Bonuses paid in crypto assets BR PUB 23/05 Crypto assets paid in connection with employment as an agreed deduction from an incentive or bonus payment will be treated as a bonus for income tax purposes and PAYE must be calculated on the full amount.

Employee share scheme rules applied to crypto assets BR PUB 23/07 Employee share scheme rules will generally apply where an employee receives crypto assets in connection with their employment (without paying market value), and the crypto assets provide an interest in the capital of the employer. The difference between the market value and any amount paid by the employee is taxed as employment income.

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Traditional residency and crypto assets TDS 24/22

Inland Revenue provides some limited online guidance on crypto assets, including on acquisition for resale, use for a profit-making scheme or in a business transaction, and calculating crypto asset income and expenses.

Amounts from the sale of crypto assets will have a New Zealand source where the contract for the sale is performed in New Zealand.

Crypto assets are often held on overseas centralised exchange or DEC. In this case, the action that constitutes acceptance and performance of a contract will be carried out over that overseas exchange, so amounts derived from the sale will not have a source in New Zealand.

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Data centres

PREPARATORY OR AUXILIARY ACTIVITIES According to the OECD Commentary, activities are generally considered preparatory or auxiliary in nature if they involve:

Providing a communication link between suppliers and customers

There has been an increase in local cloud infrastructure with significant operators opening data centres in New Zealand, which in turn gives rise to PE considerations.

Advertising goods or services

Relaying information through a mirror server for security and efficiency

The OECD Commentary ‘Update to the OECD Model Tax Convention’ (OECD, 2017) addresses PE issues related to data, software and the servers on which they are hosted.

Gathering market data

A website, as a combination of data and software, is intangible. It does not have a location that could constitute a fixed place of business PE. However, an enterprise may own, or lease and operate a server, on which it conducts business through that website. In that case, the location of the server may constitute a fixed place of business PE if those activities are not ‘preparatory’ or ‘auxiliary’ in nature.

Supplying information

Activities carried out through a server may be considered essential and significant where they are core business functions, like concluding contracts, processing payments, or automatically processing the delivery of products. What constitutes the core functions of an enterprise will depend on the nature of the business.

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Although Inland Revenue has not yet provided guidance on the tax implications of New Zealand-based data centres, if a data centre constitutes a fixed place of business PE, the business profits attributable to that PE will be taxable in New Zealand.

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Our team

Graham Murray

Mathew McKay

PARTNER

PARTNER

DDI +64 9 916 8832 MOB +64 21 909 870

DDI +64 9 916 8329 MOB +64 21 960 725

graham.murray@bellgully.com

mathew.mckay@bellgully.com

Campbell Pentney

Hayden Roberts

Savannah Feyter

SPECIAL COUNSEL

SPECIAL COUNSEL

SENIOR ASSOCIATE

DDI +64 9 916 8917 MOB +64 21 836 412

DDI +64 9 916 8927 MOB +64 21 524 205

DDI +64 9 916 8846 MOB +64 21 673 066

campbell.pentney@bellgully.com

hayden.roberts@bellgully.com

savannah.feyter@bellgully.com

Our thanks to Bell Gully lawyer Navdeep Kaur for her contribution to this publication.

Our tax practice

Organisations operating in or entering New Zealand’s digital economy face a rapidly evolving tax landscape shaped by domestic tax policy shifts, international frameworks and emerging technologies. Our tax team is at the forefront of advising digital businesses on a wide range of tax issues in New Zealand, from the tax regime affecting online marketplaces to cross-border payments for software and the application of GST to remote services.

We provide strategic and commercially grounded advice to multinational enterprises and digital businesses. We can advise you on

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permanent establishment risks, remote work arrangements, and the tax implications of data centres. More broadly, our experience spans tax investigations, disputes, and litigation, and we are known for our expert advocacy in dealings with tax authorities.

We help clients anticipate and manage risk in a shifting regulatory environment. With deep expertise across corporate tax, GST, and complex cross-border issues, we offer clear, practical guidance tailored to the needs of offshore legal and tax teams.

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INDEPENDENT RECOGNITION • Band 1 Tax Chambers Asia Pacific 2025 • Tier 1 Tax The Legal 500 Asia Pacific 2025 • Tier 1 ITR World Tax 2025 (General Corporate Tax, Tax Controversy) • Tier 1 World Transfer Pricing 2025

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The Big Picture: Digital Tax