New Zealand

General Information

Country Name: New Zealand
Currency: New Zealand Dollar (NZD, $)
Primary Tax Authority: Inland Revenue (IRD)

Key Legislation:

• Income Tax Act 2007: Primary legislation for personal and corporate income taxes.
• Goods and Services Tax Act 1985: Governs the application of the Goods and Services Tax (GST).
• Tax Administration Act 1994: Covers the administration of tax law and compliance requirements.
• Taxation (Annual Rates for 2023-24, GST, and Remedial Matters) Act: Annual legislation updating tax rates and making adjustments to the tax system.

Fiscal Authority Allocation

New Zealand operates under a highly centralized tax system, with the central government responsible for the collection of all major taxes.
Taxes Collected by Central Authorities:

• Corporate income tax (CIT)
• Personal income tax (PIT)
• Goods and services tax (GST)
• Fringe benefit tax (FBT)
• Excise duties
• Stamp duty
• Estate taxes have been abolished since 1992.

Local governments in New Zealand do not have the authority to levy income or sales taxes but can collect rates (property taxes) to fund local services.

Corporate Income Tax (CIT)

• Standard CIT Rate: 28% on worldwide income for resident companies and on New Zealand-sourced income for non-resident companies.
• Imputation System: New Zealand operates an imputation tax credit system, allowing companies to pass on tax credits to shareholders for the tax the company has already paid on profits distributed as dividends.
• Loss Carryforward: Tax losses can be carried forward indefinitely, provided there is at least 49% continuity of ownership.
• Loss Carryback: Companies may carry back losses to offset profits from the previous year.
• Thin Capitalization Rules: Interest deductions are restricted for multinational companies where the company’s debt levels exceed a certain threshold (60% debt-to-asset ratio).
• Transfer Pricing: New Zealand adheres to OECD guidelines, requiring related-party transactions to be conducted at arm’s length.

Goods and Services Tax (GST)

• Standard GST Rate: 15% on most goods and services.
• Zero-Rated Goods: Exported goods and services, financial services, and some transactions related to real estate can be zero-rated.
• GST Registration Threshold: NZD 60,000 annual turnover.
• Filing Frequency: Typically on a monthly, bi-monthly, or six-monthly basis, depending on turnover.
• Non-Residents: GST refunds can be claimed by non-residents for goods and services purchased in New Zealand and exported.

Personal Income Tax (PIT)

• Progressive Tax Rates:
  • 10.5% on income up to NZD 14,000
  • 17.5% on income from NZD 14,001 to NZD 48,000
  • 30% on income from NZD 48,001 to NZD 70,000
  • 33% on income from NZD 70,001 to NZD 180,000
  • 39% on income above NZD 180,000
• Residency Rules: Individuals are considered residents for tax purposes if they are present in New Zealand for more than 183 days in any 12-month period or if they have a permanent place of abode in New Zealand. Residents are taxed on worldwide income, while non-residents are taxed only on New Zealand-sourced income.
• PAYE System: Pay As You Earn (PAYE) is the system for withholding taxes from salaries and wages.
• Deductions and Credits: Limited personal deductions, though individuals may receive tax credits for charitable donations.

Additional Mandatory Contributions

Accident Compensation Corporation (ACC) Levy:

• New Zealand does not have a general social security system. However, individuals and businesses must contribute to the ACC, a government program that provides insurance against personal injury.
• Employer Levy: Paid based on payroll, varies by industry risk, with rates typically ranging from 0.3% to 2%.
• Employee Levy: Paid on earned income at a rate of 1.53%, capped at an annual income threshold of NZD 139,384.

Withholding Taxes

• Dividends: 33%, reduced by imputation credits or applicable tax treaties.
• Interest: 15%, reduced by tax treaties.
• Royalties: 15%, reduced by tax treaties.
• Non-Resident Withholding Tax (NRWT): Applies to payments to non-residents, with rates dependent on tax treaties.

Transfer Pricing Rules

• Arm’s Length Principle: Multinational enterprises must ensure that their cross-border transactions with related parties are conducted at arm’s length.
• Documentation: Required to justify transfer pricing arrangements, with penalties for non-compliance.
• Advance Pricing Agreements (APAs): Available for companies seeking to clarify transfer pricing arrangements with tax authorities.

Special Tax Regimes

• Look-Through Companies (LTCs): Profits and losses flow through to shareholders, who are taxed on their personal income, avoiding corporate taxation.
• Foreign Trusts: New Zealand is a favorable jurisdiction for the establishment of foreign trusts, as income earned abroad by these trusts is not taxed in New Zealand.
• Research & Development (R&D) Incentives: A 15% tax credit is available for eligible R&D expenditure.

Other Taxes

• Fringe Benefit Tax (FBT): Employers are required to pay FBT on non-cash benefits provided to employees, such as company cars, loans, and subsidies. The rate is 49.25%.
• Excise Duties: Levied on alcohol, tobacco, and fuel.
• Rates: Property tax levied by local councils to fund public services. Rates are based on the value of the property and vary by location.
• Stamp Duty: Abolished in New Zealand since 1999.

Double Taxation Agreements (DTAs)

• Key Partner Countries: New Zealand has DTAs with over 40 countries, including Australia, the United States, the United Kingdom, and China.
• Reduced Withholding Tax Rates: Treaties reduce the rates for dividends, interest, and royalties.
• Treaty Relief: Non-residents may apply for tax relief based on DTAs, and the income may be taxed in the resident country rather than in New Zealand.

Compliance and Reporting

• Corporate Tax Filing Deadline: Seven months after the end of the financial year (April 7th for most companies).
• PIT Filing Deadline: Most individuals do not need to file a tax return unless they earn additional income outside of PAYE. Self-employed individuals must file returns by July 7th.
• GST Filing: Filing is required monthly, bi-monthly, or six-monthly, depending on turnover.
• Penalties: New Zealand imposes penalties for late filings, underpayment of taxes, and non-compliance, with interest charges on overdue taxes.

Recent Developments

• Climate Action Incentives: New Zealand is implementing new tax measures to promote sustainability and reduce carbon emissions, including incentives for electric vehicles and renewable energy projects.
• Global Minimum Tax: New Zealand is exploring the introduction of the OECD’s 15% global minimum tax for large multinational companies, in line with international efforts to curb profit shifting.
• Digital Services Tax: The government is considering a digital services tax for large tech companies that generate significant revenue from New Zealand-based users without a physical presence in the country.