The information required to be included in a tax statement is set out in sections 156(A)-156(J) of the Land Transfer Act 1952. These new sections were inserted by the Land Transfer Amendment Act 2015. Of particular concern is section 156(C), which sets out the content of the tax statement. This particular new clause provides that any transferor or transferee must state whether they, or a member of that person’s immediate family “is a New Zealand citizen or a holder of a resident visa, work visa or student visa” (Question 2.1). Further, if the tax statement is being completed by the transferee and the transferee or a member of the transferee’s immediate family holds a work or student visa, the transferee must state whether they or a member of their immediate family intend to live on the land (Question 2.2). While these questions are not an issue when the transferor or transferee is a individual, deciding how to answer these questions when the transferor or transferee is a corporate entity is causing considerable confusion. In the short period of time that the legislation has been in force, I have become aware that varying interpretations have been taken by practitioners as to how these questions should be answered when the client is a corporate entity. In response to queries from practitioners, LINZ has been advising that corporate entities should answer “no” for Question 2.1 and “not applicable” for Question 2.2.
The approach in the Land Transfer Act 1952 can be contrasted with the Tax Administration Act 1994 which uses the term “offshore person” and the Overseas Investment Act 2005 which uses the term “overseas person”. Both these definitions extend to cover both natural persons and corporate entities. The reality is that there are numerous parcels of land in New Zealand (including many residential properties) that are owned not by individuals, but by companies, charitable trusts, incorporated societies and other such entities. If corporate entities follow LINZ advice and answer “no” to Question 2.1 about whether the transferor or transferee is a New Zealand citizen or holder of a visa, then any transfers to and from New Zealand corporate entities will be in the same category as all transfers to and from overseas based vendors and purchasers and as a result it is difficult to see that any meaningful statistics on foreign ownership can be generated from the information supplied.
Another aspect causing confusion is that terminology in the legislation is not used in the same way as is used or would be easily understood by a conveyancing practitioner or property owner. As an example, the use of the word “nominee” in section 156C(3) does not appear to have the common meaning of “or nominee” which is used in the standard REINZ/ADLSI form (in the sense that one party signs an agreement for sale and purchase intending to nominate a third party as purchaser prior to settlement) but rather refers to the less common situation of a purchaser holding land as a bare trustee for another party.
It may be that urgent consideration needs to be given as to whether the Tax Statement form needs to be divided into separate sections that apply to individual and corporate entities or even whether there needs to be different forms of Tax Statements for different entities. Certainly, experience in the past month has shown that the clearer and easier the questions in the Tax Statement form are for both practitioners and property owners to understand, the higher the chance that the Tax Statements will be completed correctly and that meaningful information will be able to be gathered from them.