International Charities and New Zealand Tax Law
Are you an international charity that has recently applied for listing on Schedule 32 of the Income Tax Act 2007? Or do you have a client in this position? If so, we would like to hear from you.
Are you an international charity that has recently applied for listing on Schedule 32 of the Income Tax Act 2007? Or do you have a client in this position? If so, we would like to hear from you.
Unlike the naked Archimedes’s joyful exclamation, the recent expose of the Eureka Trust comes as a more serious warning for those working in the charitable sector. Charities never need to bother with tax issues do they? Actually, yes …
Here are a few things to think about when you are in the process of leaving New Zealand. If you do not plan your move correctly, you may have to pay tax twice, or even three times on the same income. Your only insurance is to plan it right.
The first thing to consider when you are leaving New Zealand is whether you will remain a tax resident of New Zealand when you are away. This is important, because New Zealand taxes its tax residents on all income they generate anywhere in the world. Note that tax residence is quite separate from citizenship or permanent residence for New Zealand immigration purposes.
If,
then it is likely that you will break your New Zealand tax residence.
You will likely have broken your connections with New Zealand if you:
If you can do all this, then it is likely that you don’t have to pay tax in New Zealand while you are away. We suggest you fill in IRD form IR886, which can be obtained from the IRD website. The IRD will then give you a ruling about your residence.
Your circumstances will be unique, and may not be as clear-cut as above. The rules become a bit murky in borderline cases. The greater connection you have with New Zealand the more likely it is that you will not break your residence. It is not easy to make general rules about this, as each situation will depend on its peculiar facts. The IRD procedure should give you the greatest amount of certainty in these circumstances.
One other point to remember is that if you are moving to a country with which New Zealand has a double tax agreement, then residence will be less of an issue. New Zealand has double tax agreements with 39 other countries, and a list of these can be obtained here.
Don’t think you can escape the IRD by merely leaving New Zealand. Government exchange of information networks are getting better and better all the time, and it is likely that the IRD will be able to get information about you if you are moving to a developed country. Other things to watch are:
It is well worth getting professional advice on the tax consequences of moving to a new country. For example:
If you are retaining a New Zealand share portfolio it is worth letting your investment advisor know. Non-residents are able to get favourable treatment on the taxation of dividends and interest derived from New Zealand. Broadly speaking though, you will still be paying tax in New Zealand on company generated profits at 30% because of the application of the imputation rules.
In conclusion, it is important to think of the tax consequences of any big relocation event in your life. Getting it wrong can be very costly, and not to mention, extremely stressful. Be sure to get it right and get some good advice.
This article is not a substitute for legal advice and you should talk to a lawyer about your specific situation. Please contact Kris Morrison (348 8480) krismorrison@parryfield.com
If you are thinking of moving to New Zealand then here are a few tax issues to consider.
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