CORPORATE TAXES SIGNIFICANT DEVELOPMENTS
There have been no significant tax or regulatory developments during the past year.
TAXES ON CORPORATE INCOME
Income tax /Resident and nonresident companies are subject to tax at a flat rate of 33%.state and municipal taxes/Nil.
CORPORATE RESIDENCE
Residence is determined by place of incorporation, location of head office or center of management or by directors' exercising in New Zealand control of the company.
OTHER TAXES
Accident compensation levy/Levied on the employer annually, on the basis of payroll and industry type.
Excise duty /Excise duty Is levied on petroleum products, motor vehicles, tobacco, and alcohol.
Goods and services tax /Goods and services tax(GST)is a form of
value-added tax. It applies to most supplies with a “commercial” flavor.
The narrow category of exempt supplies includes financial services. The rate is 12.5% or zero .Zero-rating applies to only a few supplies, including exports.
Fringe benefit tax/Employers are subject to a fringe benefit tax at the rate of 49%on the value of noncash fringe benefits provided to their employees. “Fringe benefit” includes cars available for private use, loans at less than specified interest rates, and contributions to medical insurance funds and to foreign superannuating schemes. Fringe benefit tax
is deductible in computing liability for ordinary income tax.
Contributions to approved employee superannuating schemes (excludes foreign schemes ) are subject to 33% withholding tax.
INCOME DETERMINATION
Inventory valuation/Inventory must be valued by a cost valuation method or, where market selling value is lower than cost, at market selling value.
Capital gains/There is no capital gains tax. Taxable income includes gains on sale of real estate in circumstances prescribed in the Income Tax Act where a profit asking purpose or scheme can be deemed or imputed.
]Intercompany dividends/Dividends derived from resident companies are exempt where there is 100% common ownership and same balance date.
Dividends paid by nonresident companies are exempt from income tax but are subject to a dividend withholding (DWP) at the corporate tax rate. The dividend, grossed up by foreign withholding tax and income tax on underlying payer income, is multiplied by the corporate tax rate. Credit is then given for the foreign withholding tax and underlying income tax or
deemed tax.
Resident companies may also keep a memorandum account called a withholding payment account (WPA), which is credited with an amount equal to DWP paid. Withholding payment credits may be attached to dividends distributed.
The foreign investor tax credit effectively eliminates nonresident withholding tax (NRWT) on fully imputed dividends. The FITC applies to all dividends paid to nonresidents on or after December 12,1995.
The FITC regime provides that total New Zealand tax paid on a
nonreswsident investor's earnings through a New Zealand company can be limited to 33%. It does not operate by exemption from NRWT. Rather, where a dividend is imputed, the paying company qualifies for a reduction in its income tax if it pays supplementary dividend. The amount of reduced company income tax is equal to the supplementary dividend. The combination
of reduced income tax plus NRWT on both dividends can result in a total New Zealand tax on the earnings of only 33%
Deemed dividends may arise from transactions between related companies.
Noncash dividends derived by nonemployee shareholders are assessable to the recipient.
Foreign income/A New Zealand corporation is taxed on foreign branch income as earned. Double taxation with respect to all types of taxable income, income, including interest, rents and royalties, is avoided by foreign tax credits. Foreign dividends received are exempt from income tax but are subject to the foreign dividend withholdings payments.
New Zealand residents are taxed on deemed income derived from an interest in a nonresident company, foreign investment fund or foreign trust. A branch equivalent (BE) regime imposes New Zealand tax on residents with income interests of 10% or more in certain controlled foreign corporation (CFCs) on the notional share of income attributable to their interests in
the CFC. The regime applies to all types of income but does not apply to residents in "Grey list" countries, except where the derives exempt income from carrying on a business outside its country of reside its country of residence Grey list countries are Australia ,Canada. Germany, Japan ,Norway, The United Kingdom (including Northern Ireland ), and the United
States.
Stock dividends/Bonus issues made after September 30, 1988 can taxable or nontaxable . On a taxable bonus issue the amount capitalized becomes available for tax-free distribu
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