Living and Working in New Zealand - the Expatriate Perspective

Living and Working in New Zealand - The Expatriate Perspective
By Caroline Maxwell

Immigration and Residence

Immigration to New Zealand is dealt with according to the category of the immigrant, the four main categories for residence applications being:

• Skilled Migrant;
• Family category;
• Humanitarian category; and
• Investor category.

Immigration rules in force since 1999 mean that a points system applies to the Investor category, which aims to attract active participants in the business sector through a points system that rewards age, business experience and investment funds.

The then Minister of Immigration, Hon Tuariki Delamere, said: "The balance is important because our immigration policy has always welcomed investors, but we want investors who are going to participate actively in developing New Zealand business, not just people who think that funds buy residence in New Zealand.”

“That’s why we’ve raised the minimum level of qualifying funds to NZ$1 million and lowered the number of points associated with investment fund values. Instead, we’re placing the points emphasis on job experience and younger investors because we want applicants that qualify in this category to be people who are serious about participating in the community and economy here, not just looking for a lifestyle change and a retirement option,” he said.

“And for those serious, active, investors, the incentive in the new category is a simpler points system with only three categories of points and new procedures at our overseas offices with a streamlined application process and senior personnel assigned to assist these applicants”.

The Active Investor Migrant Policy opened on 26 November 2007. Its aim is to attract investor migrants with business experience, international connections and financial capital to New Zealand.

The policy is divided into three categories:

• Global Investor Category – for migrants investing NZ$20 million in New Zealand, including at least NZ$5 million in active investment.
• Professional Investor Category – for migrants investing NZ$10 million in New Zealand, including at least NZ$2 million in active investment.
• General (Active) Investor Category – for migrants investing a minimum of NZ$2.5 million in New Zealand, who have an additional NZ$1 million for settlement funds.

Investors need points to qualify for the Investor category. It has three points categories: age, business experience and investor funds. Points for business experience range from 1 point for 2 years experience to 5 points for 10 years experience. Twenty-five to 29 year olds attract 10 points; points gradually reduce to zero for older investors, and the Immigration Department states on its website that:

Residence applications under the Investor Category tend not to be approved if the applicant is aged 55 or over when the application is lodged with Immigration New Zealand.

Definition of Tax Residence

Tax residents are individuals who are in New Zealand for more than 183 days in any 12-month period, or have an “enduring relationship” with New Zealand.

An enduring relationship with New Zealand results from the possession of a “permanent place of abode” in New Zealand, but the tax authority takes many other factors into account, including a person's social ties, club membership, economic relationships, location of personal property, and income flows.

Resident Taxation

A tax-resident individual is subject to income tax on worldwide income on the following scale:

• Income up to NZD38,000, 19.5%;
• Income between NZD38,000 and NZD60,000, 33%; and
• Income over NZD60,000, 39%.

Non-Resident Taxation

A non-resident is a person who does not have a permanent place of abode in New Zealand and who either:

• Has not been physically present in New Zealand for a total of more than 183 days in any 12 month period; or
• If already a resident, is physically absent from New Zealand for more than 325 days in any 12 month period.

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.

While resident individuals are liable for tax on their world-wide income, non-residents are only taxable on New Zealand sourced income.

Non-resident individual pay tax on New Zealand sourced income on the following scale:

• Income up to NZD38,000, 19.5%;
• Income between NZD38,000 and NZD60,000, 33%; and
• Income over NZD60,000, 39%.

Withholding Taxes

Interest, dividend and other types of income paid to non-residents will be subject to withholding tax, usually at 15%. The rate of withholding tax on dividends may be higher, up to 30%, if the dividends are not fully imputed (ie not fully paid out of taxed income).

Non-resident entertainers and sportspeople will be charged withholding tax of 20% on income they earn in New Zealand. They are defined as people who perform in public or in front of a camera, including actors, entertainers, musicians, singers, dancers, comperes or other artists, whether alone or in a group, sportspeople and athletes in any sporting event or game, lecturers and speakers, whether on a casual or regular basis. A non-resident entertainer can be an individual, company, partnership, trust or any other entity.

Non-resident contractors (NRC) will be subject to withholding tax of 15% if they have supplied the payer with a completed Tax code declaration (IR330), and 20% or 30% otherwise.


Taxable Income

Employed expatriates in New Zealand, whether resident or non-resident, will pay tax on their base salary, reimbursements of foreign and/or home country taxes, reimbursements of school tuition, cost-of-living allowances, and expatriation premiums for working in New Zealand.

Housing allowances and the gross value of housing provided directly by an employer are fully taxable to the employee. If an employee does not rent out his/her home in their home country, but continues to maintain it while they are in New Zealand, the housing or housing allowance paid may be assessed as having a nil value.

Benefits-in-kind are generally subject to Fringe Benefit Tax (FBT) payable by the employer, at a rate which has an effect corresponding to the personal income tax rate of the employee receiving the benefit.

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.