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New Zealand: Related Information

Individual Non-Resident Taxation

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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