Tax Management in New Zealand
The gravity of an individual’s or organization’s presence to New Zealand in terms of their tax management liabilities and obligation, whether conducting business remotely with New Zealand by sending employees to New Zealand, or through establishing an office, branch or subsidiary in New Zealand, will have varying New Zealand income tax consequences.
Consequences may arise under New Zealand income tax legislation, or the US-NZ Tax Treaty or frequently, a combination of both.
The New Zealand tax year runs from 1 April to 31 March each year for most taxpayers. It is possible in some circumstances to apply for another tax year and this is commonly done to align the balance date of a New Zealand subsidiary company with its offshore parent, or due to the nature of a particular industry such as farming and retail.
An Accident compensation regime is run by the government of New Zealand to fund health care, rehabilitation and compensation for personal injuries arising from an accident. Premiums are collected from employers, employees, self-employed persons and motorists.
Goods and Services Tax (GST)
Entities are required to register for GST which is chargeable on taxable supplies at the rate of 0% for zero-rated transactions and 15% for all other taxable supplies. Zero-rated transactions include supplies made to non-residents in some cases and exports, upon meeting the criteria under the Goods and Services Tax Act to qualify for zero-rating.
Some types of income including residential rent and interest income are exempt for GST purposes. A reverse charge mechanism also operates requiring some New Zealand importers of offshore goods and services to pay GST on the value of imported goods and services to the Inland Revenue Department.
As is the global trend, transfer pricing is a key area of focus for the Inland Revenue Department. Any cross-border transfer of goods or services to a related entity must be made as an arm’s length transaction. An Advance Pricing Agreement may be obtained from the Inland Revenue Department.
International tax regime
Individuals and organizations that are resident in New Zealand are subject to the controlled foreign company (CFC) regime and the foreign investment fund (FIF) regime.
Under the recently revised CFC regime most income derived by a New Zealand resident from a CFC which derives active income is not required to be attributed to the New Zealand shareholder. The exemption does not apply in the case of CFC income derived from the performance of personal services through the CFC.
The team at NZ US Tax Specialists are experts on New Zealand income tax legislation and the US and NZ Tax Treaty. If you need advice on doing business in New Zealand, please send your request by filling our online questionnaire for tax advice to discuss your tax management strategy. We can ease your path to corporate tax compliance while you concentrate on growing market share.