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NEW ZEALAND TAXATION

Income Tax
The general rule is that residents in New Zealand are taxed on their worldwide income whereas non-residents are only taxed on income derived from New Zealand sources. Individuals are treated as New Zealand tax residents if they:

have a permanent place of abode in New Zealand, whether or not they have such

an abode outside New Zealand; or

are physically present in New Zealand for more than 183 days within any twelve

month period.

Companies are treated as New Zealand tax residents if:

they are incorporated in New Zealand;

they have their head office situated in New Zealand;

they have their centre of management in New Zealand; or

control of the company by their directors is exercised in New Zealand whether or

not decision-making by their directors is confined to New Zealand.

Income will be treated as having been derived from New Zealand if:

it is derived from any business wholly or partly carried out in New Zealand;

it is derived from the disposition of property situated in New Zealand; or

it is derived from a contract made or wholly or partly performed in New Zealand.

At present, New Zealand residents pay the following rates of tax:

for individuals (subject to certain provisions relating to low income families): income

up to $NZ38,000 - 19.5 percent;

income from $NZ38,000 up to $NZ60,000 - 33 percent; and

income of $NZ60,000 or more - 39 percent;

for all companies, a flat rate of tax of 33 percent applies; and interest - 15 percent;

dividends - 30 percent; and

royalties - 15 percent.

a withholding tax applies to non-residents that receive certain types of non-resident withholding income derived from New Zealand, namely interest, dividends and royalties. The non-resident withholding tax rates that apply to these types of income are:

The following exceptions should be noted in respect of the above rates of tax:

all of the double tax agreements to which New Zealand is a party provide that the

maximum withholding tax rate that New Zealand can impose on dividend income

is 15 percent;

most of the double tax agreements to which New Zealand is a party provide a

maximum withholding tax rate on interest and royalties of 10 percent;

in certain circumstances, a levy of two percent of any interest payments may be paid

instead of paying non-resident withholding tax (see paragraph 5.8 below); and

special rules apply to payments made to related overseas parties.

New Zealand has entered into double tax agreements with a number of countries including Australia, Belgium, Canada, China, Chile, Denmark, Fiji, Finland, France, Germany, India, Indonesia, Ireland, Italy, Japan, Korea, Malaysia, Netherlands, Norway, Philippines, Poland, Russian Federation, Singapore, South Africa, Spain, Sweden, Switzerland, Thailand, Taiwan, the United Arab Emirates, the United States of America, and the United Kingdom.

If funds are borrowed by a New Zealand resident company from a non-resident not associated with the New Zealand resident company, and the non-resident lender does not have a fixed establishment in New Zealand, the interest payable to the non-resident lender can be paid free of non-resident withholding tax, provided that a levy of two per cent on the interest payable is paid by the New Zealand resident company. However, the New Zealand resident company must have obtained approved issuer status from the Commissioner of Inland Revenue. If approved issuer status has been obtained, the New Zealand resident company can elect to either pay the levy or non-resident withholding tax, depending on the circumstances and preferences of the non-resident lender. To the extent that the approved issuer levy is not paid on any interest payment, non-resident withholding tax is payable.

Transfer pricing and thin capitalisation rules also apply. The two main features are:

the transfer pricing regime requires that an arms length price be applied to any supply

of goods and services to and from New Zealand between associated parties; and

under the thin capitalisation regime, a business which is controlled by a single

non-resident will only be entitled to deduct interest expenditure on borrowings to

the extent that total debt does not exceed 75 percent of total assets.

Goods and services tax
Goods and Services Tax (GST) is payable at the rate of 12.5% on the value of any goods or services supplied in New Zealand by a GST registered person. It is an indirect tax based on a value-added principle.

GST is levied on goods and services supplied by a person carrying on a taxable activity. GST is also levied on imported goods. Persons who are registered for GST must charge GST on all of their taxable supplies (or sales), and can claim a credit for any GST paid on expenditure incurred in carrying on their taxable activity. The net difference results in either a payment to or a refund from the New Zealand Inland Revenue Department.

The following supplies are exempt from GST:

financial services;

residential rentals;

donated goods and services supplied by a non-profit body; and

fine metals.

The following supplies are subject to GST at a rate of 0% :

exported goods;

goods situated overseas;

taxable activities disposed of as “going concerns”;

newly refined precious metal;

"exported" services;

certain supplies in respect of which excise duty and petroleum tax are payable;

the supply of certain telecommunications services;

contributions of land made as a condition of a resource consent or as a

development contribution; and

business-to-business supplies of financial services.

A limited range of goods are subject to further indirect taxation in the form of an additional sales tax, for example, motor vehicles, alcohol and tobacco.

Customs and excise duty
The Government also taxes specified imported goods by way of customs and excise duty. The rates vary widely according to the country of origin of the goods and the type of goods being imported. Any business venture which involves the importation of goods, the exportation of components to be assembled overseas (to take advantage of cheap labour), or the re-importation of the made-up product should be carefully checked with the New Zealand Customs Department.

Fringe benefit tax
It is a requirement to pay fringe benefit tax (FBT) on the value of fringe benefits provided by employers to their employees including the private use or enjoyment of a motor vehicle (including its availability for use), subsidised or discounted goods and services and low-interest loans to employees.

Stamp duty
Stamp duty is not payable in New Zealand on transactions. In particular transactions involving transfers of land, leases, share transfers and securities are free from stamp duty.

Capital gains
At present, there is no broad-based capital gains tax in New Zealand. However, some capital gains on certain land transactions may be taxable, for instance, where land which has been acquired with the intention of holding it as a long term investment, is subdivided. Gains on share transactions are also taxable where the person making the gains is deemed to be a share trader.

Gift duty
Annual gifts of up to $NZ27,000 are free from gift duty. Gift duty arises on a graduating scale of up to 25 percent of the excess for gifts exceeding $NZ27,000 per annum.

Death duties
No estate or death duties are payable in New Zealand.

For further information, please contact us »

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