New Zealand tax facts

NRWT is deducted at 0% from interest paid by a New Zealand borrower to an overseas lender where the parties are not associated (or the funds originate from an associate), the borrower is an approved issuer and the debt instrument is approved by Inland Revenue. Instead AIL equal to 2% or 0% (for certain securities) of the interest payments is payable.

Provisional tax can also be calculated using the estimation option, the GST ratio method (subject to certain criteria being met) or the accounting income method (subject to certain criteria being met). The year used in calculating the uplift is the year of the most recently filed income tax return.

Controlled Foreign Company (CFC)

A foreign company that is more than 40% controlled by one New Zealand resident or more than 50% controlled by two to five New Zealand residents. Income is taxable in New Zealand if the CFC’s “passive income” is equal to or more than 5% of the total income earned by the CFC.

Non-portfolio Foreign Investment Fund (FIF)

A foreign company that is owned 10% or more (but not controlled) by New Zealand residents. Taxed either as a CFC or as a portfolio FIF.

Portfolio Foreign Investment Fund (FIF)

A foreign company not controlled by New Zealand residents, or a foreign superannuation scheme or foreign life insurance policy. An ownership interest of less than 10% is required. Taxed using one of four methods:

• Fair dividend rate (FDR)
• Cost
• Comparative value (CV)
• Deemed rate of return (DRR)

A foreign superannuation scheme entered into by a non-resident is subject to separate rules when lump sum withdrawals are made from the scheme. Regular pensions and commutation payments are taxed as income.

Straight line or diminishing value can be applied on an asset by asset basis. Depreciation rates vary depending on estimated useful life. Individual asset purchases can be immediately deducted if, in most cases, the item costs less than $1,000. Special rules apply where assets using the same depreciation rate are purchased at the same time.

Buildings and fit-outs are treated as follows:

ESCT is deductible from employer contributions to superannuation schemes, including employer contributions to KiwiSaver.

The alternate rate calculation applies the following rates.

GST is charged at the rate of 15% on all taxable supplies made in New Zealand. To find the GST component of a GST inclusive amount, multiply by 3, then divide by 23. Non-resident businesses can be refunded GST paid on New Zealand purchases, in some cases.

The maximum imputation ratio is 28:72. Dividends are subject to resident withholding tax (RWT) at the rate of 33% to the extent the dividend is unimputed. Generally, an additional 5% RWT must be withheld where dividends are imputed at 28%, but this is not compulsory where the recipient is a company. The imputation credit account must have a credit balance at 31 March, or a 10% penalty will apply to the debit balance.

Individuals

Companies

Trusts

* Government has introduced legislation which would see these rates increase to 39% from the start of the 2024/25 year (generally 1 April 2024).

Flow-through entities

For residential property acquired on or after 27 March 2021, interest incurred from 1 October 2021 is not tax deductible

For property acquired before 27 March 2021, the deductibility of the interest is being phased out with no deductions allowed from 1 April 2025. The amounts of interest that will be denied a deduction are as follows:

New builds with a code compliance certificate issued on or after 27 March 2020 will be exempt and interest will be deductible for 20 years. Other specific property will also not have interest deductions restricted.

Available options are:

• The Inland Revenue kilometre rate for motor vehicles
• Other published mileage rates (e.g. AA rates)
• Actual costs

Inland Revenue kilometre rates for the 2023 income year are:

Where a double tax agreement exists, the default NRWT rates may be reduced. Above are examples of rates for some common treaty partners (also including reduced rates where New Zealand rules permit). New Zealand’s extensive treaty network means specific rates are dependent on individual circumstances (please seek professional advice).

Resident Individual Investors

Both thresholds must be met for the rate to apply. Row 2 applies if Row 1 thresholds are not met. Income is measured for either of the past two years. Trust, corporate and non-resident investors are subject to rates of between 0% and 30%, depending on the type of entity and other relevant circumstances. Please seek professional advice.

Prescribed Interest Rates for Low Interest Loans.

These rates are also used to calculate the value of a deemed dividend arising where funds are lent by a company to its shareholders.

The number of times provisional tax is payable depends on the option used to calculate provisional tax and how many times GST (if registered) is paid. Examples of payment dates for the most common balance dates are below. If the due date is not a working day, then it moves to the next working day. Terminal tax dates shown apply to taxpayers linked to a tax agent.

A tax credit of 15% is available on specified research and development spending, and is refundable in some circumstances. Pre-approval of activities must be sought before claiming the R&D credit.

All dividends and interest paid must be reported to Inland Revenue by the 20^th of the month following payment, including details of the recipients of the interest or dividend.

RLWT, generally at the lesser of 39% of the gain or 10% of the sale price, must be deducted from the proceeds of residential property sales made by offshore persons where the property was purchased on or after 29 March 2018 and has been owned for less than five years, or on or after 27 March 2021 and has been owned for less than 10 years where the property is not a new build.

The vendor can file a tax return to recover any overpayment.

The repayment threshold has increased to $22,828, with the repayment rate at 12%. Repayment holidays are one year in length for borrowers who go overseas and apply for such a holiday. Losses cannot be used against income to reduce a liability for student loan repayments.

Tax Shortfall

These penalties may be reduced where a voluntary disclosure is made, or the shortfall is temporary as well as for previous good behaviour.

Late Filing

Late Payment

Interest deductions can be restricted if both the New Zealand and worldwide group debt percentages are exceeded.

Use of money interest on provisional tax will arise at times outlined below provided payment is made on time based on the standard uplift for the taxpayer and associates. Special rules apply in the first year of business.

Schedular payments are payments for specific activities such as directorships, labour hire firm contractors, actors and commission sellers.

Recipients are able to choose their rate on the filing of an IR330C provided it is greater than the minimum rates above. Default rates apply where a rate is not chosen.

Rates for non-residents can apply to non-resident contractors performing services of any kind. Exemptions are available in some situations.