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A person is resident in
New Zealand if:
- they
are present in New Zealand
for more than 183 days
in any 12-month
period, or
- if
they have
an “enduring relationship”
with New Zealand.
The Income Tax Act 2004
says that a person, other
than a company, who has
a “permanent place
of abode” in New Zealand
is a New Zealand tax resident.
“Permanent place of
abode” means more
than just a building that
is lived in; it covers all
ties and links with New
Zealand. These may be social,
physical, economic or personal.
An
individual who is non-resident
in New Zealand pays New
Zealand income tax only
on income that has a source
in New Zealand.
A
person who has not been
tax resident in New Zealand
for at least 10 years and
returns or moves to New
Zealand is known as a transitional
resident for the first 48
months, which is similar
in most respects to being
non-resident. A person may
only be a transitional resident
once during their lifetime.
A
non-resident or transitional
resident is subject to New
Zealand tax only on income
earned or sourced in New
Zealand; in some cases withholding
tax will have been deducted
from such income by the
New Zealand payor, and this
withholding tax is normally
a final tax.
A
non-resident who works as
an employee or a contractor
while in New Zealand needs
to complete an IRD number
application - individual
(IR595). Tax will normally
be deducted on a pay as
you earn (PAYE) basis and
includes Accident Compensation
Corporation (ACC) earners'
levy.
The rates of income tax
in 2008 are as follows (but
they will change as of October
1, 2008):
Taxable
income |
Tax
on this income |
$0
– $38,000 |
20.9c
for each $1 |
$38,001–
$60,000 |
34.4c
for each $1 |
$60,000
and over |
39c
for each $1 |
An
employee who does not complete
correct documentation pays
46.4c on every dollar of
income.
New
Zealand does not have a
capital gains tax as such;
but non-residents are likely
to have to pay income tax
on a gain resulting from
the sale of real estate
or certain types of financial
asset.
New
Zealand Foreign Trusts
The
New Zealand Foreign Trust
is exempt from New Zealand
taxation if it is set up
by a non-resident, even
if it is managed from New
Zealand. Trusts do not need
to be registered.
The
governing statute is the
Trustee Act 1956, based
on English trust law. There
is an 80-year perpetuity
period and a 21 year “wait
and see” rule. New
Zealand bankruptcy law provides
protection to trustees of
New Zealand trusts against
actions brought by creditors
of the settlor. There are
no forced heirship provisions
in New Zealand trust law.
Under
specific provisions of New
Zealand tax law, a trust
settled under New Zealand
law by a settlor (or grantor)
who is not resident in New
Zealand is a “foreign”
trust, even if the trustee
is resident in New Zealand,
and is not subject to New
Zealand tax on income derived
outside New Zealand.
If
effective management of
a trust is New Zealand resident
then the trust may claim
the benefit of New Zealand's
tax treaty network.
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