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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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