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Taxation in New Zealand

Taxation in New Zealand

One of the main points of interest of people moving to a foreign country is the taxation system. No matter if one comes to New Zealand for starting a business or for work, getting acquainted with the NZ tax system is mandatory.

Taxation in New Zealand implies levying the income tax on the income earned by individuals and companies. While the first category of taxpayers will be imposed with the personal income tax, companies will be imposed with the corporate tax. There are also other taxes which need to be paid and our lawyers in New Zealand can offer more information about them. They can also help foreign investors interested in setting up companies in New Zealand. If you need a tax lawyer in Wellington or a tax lawyer in Auckland, feel free to contact us.

What are the main taxes in New Zealand?

The NZ tax system is made up of direct and indirect taxes. The direct taxes are represented by the income tax which applies to individuals and companies and indirect taxes, among which the Goods and Services Tax – GST – is the best known.

It should be noted that the taxation system in New Zealand provides for individuals and companies to be taxed on their worldwide income (if they are residents) or on the income earned in New Zealand (if they undertake any type of activity on a temporary basis).

The collected taxes are used for funding programmes and services. The Government offers a transparent view of the manner in which the taxes that are collected from businesses and individuals are put to good use through the financial statements issued by the Treasury.

Tax compliance and filing for companies is easier with the services provided by our accountants in New Zealand. You can rely on our expertise for preparing the annual financial statements, as well as audit and compliance services for larger companies. Lighter requirements apply in New Zealand in case of small to medium companies and our team can give you complete details about these.

Learn more about taxation in New Zealand with the help of our tax lawyers in Auckland or tax lawyers in Wellington, depending on your region.

The corporate New Zealand tax rates

The New Zealand tax system provides for companies to register with the Inland Revenue in order to be considered tax residents in this country and our New Zealand lawyers can explain how the tax resident status can be obtained in this country. Under the same taxation system, a company will be imposed the income tax on the business profits earned on a worldwide basis or sourced in New Zealand. Depending on the location of your business, you can contact our tax lawyers in Wellington or tax lawyers in Auckland for detailed guidance.

Compared to the personal income taxNZ tax for companies is applied at a flat rate of 28% no matter if the income is generated at a global or local level.

Foreign companies will benefit from the same taxation system imposed on New Zealand companies provided that they have a place of management here. Apart from this, they will also benefit from the double taxation agreements signed by New Zealand. Details about double taxation agreements and how to benefit from them can be offered by our tax lawyers in NZ.

Below, our team highlights the NZ tax rates according to business type:

  • Sole proprietor: this is the self-employed individual, the simplest business form and the one with the highest percentage of liability that is taxed at the same rate as the individual personal income tax detailed below;
  • Companies: the 28% corporate income tax applies to most companies, including the limited liability company (LLC) commonly chosen by local and foreign investors in the country;
  • Māori authorities: the corporate income tax rate in this case is 17.5%;
  • Unincorporated organizations: they are subject to the same tax rate as that for individuals:
  • Trusts and trustees: 0% tax rate for the initial amount of money put into the trust and 33% on any income earned by the trust.

Companies are required to file the income tax returns at the end of the business year and pay the tax in a lump sum also at the end of the year (for their first business year). After the first year, NZ companies will pay the tax in installments in the form of the so-called provisional tax, throughout the year. This can be explained in detail by our tax lawyers in NZ.

In most cases, the income tax returns ate due at the beginning of July (the 6th or 7th of July in most cases) if the company does not have an extension for this submission. At the end of august (August 28th) companies are expected to make provisional tax payments in those cases in which they have a March balance date (and when they use the standard, estimation option). Please keep in mind that the key tax dates listed herein were valid at the time the article was written and that they can differ if a date falls on a weekend or a public holiday.

Penalties apply for late filings and for the late payment of taxes. In some cases, shortfall penalties apply in those situations that can be attributed to the taxpayer’s behavior (such as gross carelessness). Criminal penalties are also applicable in case of knowledge offences, evasion and obstruction.

In 2021, companies in New Zealand may benefit from a relief package if they have been severely affected by the coronavirus pandemic. If you have a business in the country’s capital, contact our tax lawyers in Wellington about how you can benefit from this relief package.

You can rely on our New Zealand law firm for full information on the tax legislation applied to companies operating in this country.

The goods and services tax

This is the New Zealand equivalent of the value-added tax applies in other countries, for example in European ones. It is a tax that applies on the goods and services sold in the country by registered companies (suppliers) and the types of goods and services to which it applies are subject to a number of exceptions.

The goods and services tax (GST) applies to a supplier that, in a given 12-month period, has earned a turnover of over 60,000$ from the taxable activities. When this happens, the company needs to register for GST purposes and it will start charging this tax from its clients, collect it and make the needed payments to the authorities throughout the year. Companies can also register on a voluntary basis. The GST tax might be complex for some businesses, therefore we recommend consulting with a tax lawyer in NZ for guidance.

There are two NZ tax brackets for in this particular tax: the 15% standard rate and the 0% rate for exempted goods. For example, exports are subject to the 0% rate as well as some residential property sales, among other types of supplies.

GST returns are filed on a monthly, bimonthly, or every six months, depending on the value of the supplies made in a year. The returns are filed and the payment is made by the end of the month following the end of the taxable period.

Individuals located in the North Island can contact our tax lawyers in Wellington to discover more about GST returns.

The personal income NZ tax rates

As mentioned above, the personal income tax is applied to individuals residing in New Zealand. In order to pay the personal income tax, an individual must be a tax resident here. While New Zealand citizens will acquire the taxpayer status automatically, foreign citizens must be residents of this country and thus be registered for taxation here in order to pay their taxes in New Zealand. This status can be obtained through a work contract or by starting a business, however, foreign citizens can also relocate here for other purposes and become New Zealand taxpayers. No matter where you reside in the country, you can contact our tax lawyers in NZ.

Individuals will be levied the personal income tax on the following sources:

  • earnings derived from salary or other types of wages paid by a local company;
  • earnings derived from owning shares in a local or foreign company;
  • earning from money generated by investment funds or pension funds;
  • earnings derived from owning and renting a property located in New Zealand;
  • earnings from other sources, such as offshore companies and bank accounts.

The personal income NZ tax rates range from 10.5% to 33%, as follows:

  • for an annual income of maximum 14,000 NZD, the 10.5% rate applies;
  • for an annual income between 14,001 and 48,000 NZD, the 17,5% rate applies;
  • for an annual income between 48,001 and 70,000 NZD, the 30% rate applies;
  • for an annual income of more than 70,000 NZD and less than 180,000 , the 33% rate applies;
  • for the remaining income over 180,000 NZD a 39% tax rate is in place.

Fringe benefits tax in New Zealand

In New Zealand, fringe benefits tax (FBT) is a tax on non-cash benefits provided to employees, such as work vehicles for personal use, subsidies on gym memberships or insurance, and discounted goods and services. However, FBT does not apply to items that are already taxed for the employee, such as salary and wages, cash bonuses, and employee allowances. Our tax lawyers in NZ can provide you with detailed guidance and answer your questions about FBT and other tax matters.

This tax applies to past, present, and future employment, and even applies if the benefits are provided through someone else. You must pay FBT on benefits given to your employees, including their family members or other associates.

If you are a large employer with many employees in North Island, you may benefit from seeking professional advice from our tax lawyers in Auckland and tax lawyers in Wellington. Do not hesitate to contact our team of attorneys in New Zealand for details regarding labor law, payroll, or workplace policies.

Land and property-related taxes in New Zealand

Property tax in New Zealand is applied to both the value of the land and any improvements made to the property.

Since the enactment of The Land Tax Abolition Act 1990, there are currently no land taxes in New Zealand. However, local authorities are responsible for managing and collecting property taxes on properties within their jurisdiction. If you have complex tax affairs, it may be a good idea to seek professional advice from our tax lawyers in Auckland or tax lawyers in Wellington, as well as in other locations.

Recently, the New Zealand Government made some major changes to the rules around buying and selling property in an effort to control the rapidly rising housing prices. These changes included:

  • If you sell a property within 10 years of buying it, you may need to pay income tax on any profit you make from the sale;
  • If you buy a newly built home, you may be able to sell it within 5 years without being subject to income tax on any gains made from the sale;
  • If you own a property that is not your main home and you sell it for a profit, you may need to pay income tax on that profit;
  • Property owners can no longer deduct the interest they pay on loans used to buy or improve rental properties from their rental income when calculating their tax.

Double taxation agreements

If you are considered a tax resident in more than one country, you may be required to pay taxes on the same income in both countries. However, New Zealand has double taxation agreements with many countries that specify which country has the right to tax specific types of income. This agreement affects both individuals and businesses throughout New Zealand. To understand how double taxation agreements can affect your business, contact our tax lawyers in Auckland and tax lawyers in Wellington.

New Zealand currently has double taxation agreements with 40 countries.

If you are a taxpayer in New Zealand who is concerned about double taxation, our team of tax lawyers in NZ can provide you with detailed guidance. Additionally, if you have other legal issues or concerns, our law firm in New Zealand offers a wide range of services.

If you are a property owner in New Zealand and want to understand more about the recent changes to the property tax laws, you may want to speak with our tax lawyers in NZ who can provide you with detailed guidance. Also, our team of accountants in New Zealand can help you with the financial and accounting aspects of complying with the new rules. Our firm also offers services for residents, including legal advice from tax laywers in Wellington and tax lawyers in Auckland.

Understanding the tax brackets NZ is important for both individuals and investors.  Our law firm in New Zealand can advise foreign citizens interested in relocating to this country.

Individuals who have more than one source of income are expected to pay secondary tax. The amount depends on the secondary tax code that is issued by the employer or the payer and they also have the same values (10.5%, 17.5%, 30%, 33% and 39%). Moreover, one can obtain tailored tax rates for salaries, wages and pensions. This can apply on the income obtained from salaries or wages, the veteran’s pension and the New Zealand Superannuation. Those who are interested need to apply for the tailored tax code and our team of lawyers can help you during this process. We can also help you estimate the tax brackets NZ under which you will fall based on the tailored tax.

The personal income tax dates are also at the beginning of July and the end of August. Our team of tax lawyers in NZ can give you more details.

Tax advantages offered by New Zealand

Even if the New Zealand tax rates can seem high compared to those in other jurisdictions, it should be noted that it comes with several advantages, among which:

  • there are no taxes imposed on inheriting goods in New Zealand;
  • the capital gains tax is imposed on certain incomes only, such as specific investments;
  • dividends benefit from a full imputation system which implies the tax to be levied on the shareholders and not on the company; dividends received by a resident company from a wholly owned resident group are usually exempt; foreign-source dividends received by resident companies are usually exempt from income tax (with some exceptions);
  • there is no wealth or net worth tax imposed in New Zealand.

Apart from these, the Goods and Services Tax in New Zealand is levied at a standard rate of 15%, however, there are also goods which are applied a 0% tax rate or are exempt from this levy. A tax lawyer in NZ can explain in more detail the local taxes.

For full information on the New Zealand tax rates, please feel free to contact us. We can also help if you are interested in opening a company in New Zealand.