Tax Issues to Consider When Moving to New Zealand
If you are thinking of moving to New Zealand then here are a few tax issues to consider.
Tax Rates (for year ending 31 March 2011)
$0 – $14,000
$14,001 – $48,000
$48,001 – $70,000
|Companies (Taxable Income)||28%|
|Trustees (Taxable Income)||33%|
(Note: Split rates apply for the year ending 31 March 2010, as the rates changes on 1 October 2010 to the above rates).
Save if you plan. If you don’t – prepare to pay the cost.
- The international tax rules are very well developed, and generally speaking, a New Zealand resident will be taxable on their worldwide income.
- New Zealand has a transparent, bribe-free system, and it has a, comparatively speaking, aggressive Tax Regime. It therefore pays to take advice to get things right. Any mistakes can attract significant penalties and/or criminal liability.
- New Zealand’s double tax treaty network with other countries is fairly well developed, with 35 currently in place. Refer to the following page to see if your country is listed: http://www.taxpolicy.ird.govt.nz/international/DTA/index.html. Double tax treaties are very useful as they attempt to reduce double taxation. They are not always effective, but for the most part they work very well.
- New Zealand does not have a general capital gains tax, although some of the income tax provisions essentially tax capital gains. For example, generally speaking, if one is not in the business of dealing in property or subdividing or developing land etc, the gain on the sale of the land will not be taxable income.
- Gift duty applies to gifts made totalling in excess of $27,000 in any 12-month period (although the Government has announced that this will be abolished from 1 October 2011). This is an important tax to keep in mind, and it is relatively easy to plan around it. You will have to plan for this well before you arrive in New Zealand, however.
- New Zealand does not have death or stamp duties.
- Special rules have been developed to tax income from financial arrangements. Broadly speaking the rules may tax income even in cases where no actual cash has been received.
Tax Residents and Temporary Residents
Persons Who Have Been New Zealand Tax Resident In The Past 10 Years
New Zealand taxes its tax residents on their worldwide income. Generally speaking, a person becomes tax resident in New Zealand from the first day of presence if:
- they stay for longer than 183 days in a 12-month period; or
- they have a permanent place of abode in New Zealand.
New Residents (Transitional Residents)
New Residents (“transitional residents”) are able to take advantage of an exemption from tax on their offshore income. The exemption is intended to attract Kiwis back to New Zealand who have been away for more than 10 years, as well as encourage other people to come and live in New Zealand. If you do fall within the exemption then it will apply to you for 48 months after your arrival. Broadly speaking it means that you will not have to pay tax on your offshore generated income.
Tax Traps for People Moving to New Zealand
People moving to New Zealand often do not realise that the following tax rules will apply to them:
- If you come for an LSD trip (Look, See and Decide) then you may be resident in New Zealand from the date of the trip, and not the date you actually come to New Zealand. This will be the case if you exceed the 183 days in New Zealand in a 12 month period;
- If you hold foreign currency with the equivalent value of more than NZ$50,000, then you will be taxed on realised gains on those currencies. Alternatively, if you leave again before realising the gains, any unrealised gains will be taxable when you leave;
- If you are not a transitional resident then you have to consider how the foreign investment fund rules and controlled foreign company rules will affect you.
- If you are the settlor/trustee/beneficiary of an offshore trust you have to consider the New Zealand tax impact on that trust.
- If you are shifting your business to New Zealand then GST (Goods and Services Tax) could apply to you. You may be able to claim a refund of GST paid on goods imported into the country if you use the goods for business purposes.
- If you are a contractor that comes to New Zealand to work for a few days, on say, an oil-rig, then your employer will withhold tax on your salary unless you have a valid certificate of exemption.
Parry Field Lawyers provide legal advice on a range of tax matters and are able to assist you with any PIE tax questions or income tax and GST questions that you might have. For further assistance please contact Kris Morrison (348 8480). (Don’t structure your affairs based on free background reading like this article. It is not legal advice.)