Understanding New Zealand tax law

If you are thinking about moving to New Zealand on a permanent or semi-permanent basis, it is important to note that the tax system you will encounter might differ in some important ways from the one you would leave behind.

Attractive features of the New Zealand tax system

There are several key features of the New Zealand tax system that may be attractive to new migrants:

• The absence of any inheritance tax
• The absence of stamp duty on property transactions
• The absence of a capital gains tax on real property and on profits from the sale of some equities (generally shares in New Zealand companies and certain Australian companies)
• The transitional resident rules (see below)
• New Zealand’s offshore trust rules – although advice must be taken before migrants move to New Zealand, the possibility exists for wealth intended for offshore beneficiaries to grow free of New Zealand tax

The basics

• The two main taxes that you would pay in New Zealand are income tax and GST (payable at 12.5% on nearly all goods and services purchased).
• The highest rate of income tax for individuals is 38% on income over NZ$70,000 per annum. The corporate tax rate is a flat 30%.
• There is no separate social security tax in New Zealand; however a levy is payable on employment earnings to fund a universal personal accident insurance scheme (ACC).
• There are no compulsory pension contributions. A voluntary savings scheme called KiwiSaver is available to permanent residents under immigration law.
• Except for property rates, there are no local or state taxes.

Transitional resident rules

As an NZ tax resident, you would be taxed in New Zealand on income you earn in New Zealand. Unless the transitional residents’ exemption discussed below applies, you would also be taxed on income you earn in any other country – including in your old home country.

If you have never been New Zealand tax resident, you will qualify for transitional tax residence status. No application is required. The exemption lasts for 48 months from your arrival date. During this exemption period you should only be subject to NZ income tax on employment or service income for work performed post arrival, plus any New Zealand sourced income. This exemption period gives you plenty of time to manage your foreign investments in a tax efficient way in preparation for the expiry of the exemption. It is particularly relevant for business migrants and, in fact, any migrant who would like to retain funds/investments offshore.

If you are a returning New Zealander who has continuously been a non-tax resident for at least 10 years, you are also entitled to the exemption.

Business structures

If you are a business migrant looking to do business in New Zealand, the following business structures are available to you:

• As a company (tax rate at 30%)
• As a partnership (profits taxed at the partner level)
• As an individual (top marginal tax rate of 38% applies)

For companies, an imputation (franking) system applies, which allows income tax paid by the company to be attached to dividends paid through to shareholders. There are no specific tax exemptions for commencing a new business in New Zealand; however, accelerated rates of depreciation apply for new business assets purchased.

Need to know more?

This explanatory article provides only a summary of New Zealand tax rules; there are many rules that might be relevant to your individual circumstances which have not been mentioned. We recommend that you seek professional tax advice tailored to your personal circumstances.

Written by Steve Camage, PricewaterhouseCoopers

Steve Camage is Director, Tax, for PricewaterhouseCoopers New Zealand