SIGNIFICANT DEVELOPMENTS
The top personal tax rate has been increased to 39% for income over NZ$60,000, from April 1, 2000. The government has implemented several antiavoidance measures to prevent individuals from structuring their affairs, so they are not subject to the 39% tax rate, and is about to introduce further measures. During the 2001 income year, the government
introduced measures to prevent individuals from diverting personal income through companies (which are still subject to a flat tax rate of 33%), raised fringe benefit tax to complement the higher individual income tax rate, and introduced a superannuation fund withdrawal tax to prevent employees from substituting superannuation contributions, which are taxed
at 33%, for personal income. The government will shortly implement a regime that will prevent individuals from diverting income through trusts to related minors and will recharacterize certain services-related payments (that are currently not assessable), so that become gross income.
TERRITORIALITY AND RESIDENCE
A resident of New Zealand is subject to tax on worldwide income. A nonresident is subject to tax only on income from sources in New Zealand.Residence is determined by the following tests.
1. Permanent place of abode: Persons are deemed residents of New Zealand if they have a permanent place of abode in New Zealand, notwithstanding that they may also have a permanent place of abode outside New Zealand.
2. 183 days’ presence: Persons are deemed residents of New Zealand from the date of their arrival in New Zealand if they are personally present in New Zealand for a period or periods exceeding in total 183 days in any 12-month period.
Employment and self-employed income earned in New Zealand by nonresidents is taxable unless the nonresidents’ exemption or a double taxation agreement exemption applies.
Nonresidents’ exemption/A nonresident’s personal services income earned in New Zealand is exempt from New Zealand tax if all the following conditions apply.
1. The visit (or visits) of the nonresident does not exceed a period or periods of 92 days in total in the income year.
2. The nonresident is liable for income tax on New Zealand-source income in his or her country of residence.
3. The services are performed on behalf of a person who is not resident in New Zealand.
This exemption does not apply to public entertainers, such as performing artists and professional athletes. They are subject to a maximum 20% withholding tax.
Double taxation agreements/Although the terms of treaty articles vary, generally, remuneration derived by a nonresident employee from personal services performed in New Zealand is not taxable in New Zealand if all the following conditions apply.
1. Recipient is present in New Zealand for not more than 183 days in any 12-month period.
2. Remuneration is paid by or on behalf of a nonresident employer.
3. Remuneration is not borne by a permanent establishment (branch) or a fixed base that the employer has or is deemed to have in New Zealand.
GROSS INCOME
Employee gross income/A resident is taxed on salary, wages, bonuses, tax reimbursements, allowances, and retirement gratuities received in cash, regardless of where payment is made. Nonresidents are taxed only to the extent their employment income is earned in New Zealand (i.e., services
are performed in New Zealand), regardless of where payment is made and whether it is remitted to New Zealand. Allowances paid in cash that are no more than a reimbursement of expenses incurred within employment are generally not taxable. The benefit arising from the use of an employer-provided automobile, a low-interest loan, or discounted goods or
services is not taxable to the employee, but the value of a benefit from the provision of shares or options, lodging, or housing by an employer is taxable to the employee. Other benefits provided to an employee in a non-monetary form are generally not taxable in the employee’s hands (see “Fringe benefit tax” below).
Resident individuals are subject to New Zealand tax on their overseas income. A credit is available for foreign tax paid on that income up to the level of New Zealand tax payable.
Capital gains and investment income/There is no capital gains tax. However, the income tax legislation specifically includes various forms of gain that would otherwise be considered a capital gain within the definition of “income.” Gross income includes gains on the sale of real estate in certain circumstances and on personal property where the taxpayer acquired the property for resale or deals in such property or where a profit-making purpose or scheme can be deemed or imputed. Gains on financial instruments are taxable when realized or when the instruments are deemed to have been
disposed. Above certain threshold limits, such gains are taxable on an accrual (yield-to-maturity) basis, which may include unrealized ga
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