ins.Rent derived from property is gross income. Deductions are allowed for expenses incurred in deriving the rental income.
New Zealand residents holding a 10% or greater interest in a controlled foreign company (CFC) include in their taxable income the income (calculated under New Zealand tax rules) of the CFC multiplied by the percentage their interest represents in the company.
A foreign investment fund (FIF) regime applies to nonexcepted interests in foreign investment funds. Resident holders of such interests are taxed on the change in value of the interest over the income year, together with distributions received. Generally, income from interests in CFCs and FIFs resident in the following countries is excluded: Australia, Canada, Germany, Japan, Norway, the United Kingdom, and the United States. No distinction is made between passive and business income.
Investment income derived by a nonresident from a New Zealand source is taxable in New Zealand, but where that person is a resident of a country that has a double taxation agreement with New Zealand, the tax on dividends and interest income is generally limited to 15% or 10% of that gross income under the provisions of the treaty. The foreign investor tax credit (FITC) regime effectively eliminates nonresident withholding tax (NRWT) on fully imputed dividends paid by a New Zealand company to a nonresident. The FITC regime provides that total New Zealand tax paid on a nonresident investor’s earnings through a New Zealand company can be limited to 33% (the company tax rate). 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 a 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%.
DEDUCTIONS
Business deductions/No deduction is allowed for expenditure to gain income from employment. Deductions are available for expenditure incurred in deriving gross income (other than employment income) or in carrying on a business. Subject to certain exemptions, entertainment expenditure is only
50% deductible.
Nonbusiness expenses/No deduction is permitted for medical, superannuation, or insurance contributions.
Personal allowances/Common rebates include the following.
Maximum
rebate
NZ$
Child taxpayer rebate………………………………………… 156
Charitable donation rebate…………………………………… 500
Housekeeper rebate ………………………………………… 310
In addition, tax credits for family assistance are available. These credits are aimed at low-and middle-income families. They are generally paid in fortnightly installments, with any under-or overpayment being calculated annually. Amounts received are not taxable.
TAX CREDITS
Tax credits are available for the following.
1. Tax withheld source:
a. Deduction from employee wages;
b. Installments (provisional tax) paid by business taxpayers;
c. Resident withholding tax (RWT) on interest and dividends paid to residents;
d. Nonresident withholding tax on interest, dividends, and royalties where the withholding tax is not a final tax.
2. Tax paid by a CFC on the income that is attributed to New Zealand shareholders.
3. Foreign tax paid on foreign-source income derived by a resident (up to the level of New Zealand tax payable).
4. Imputation credits: To avoid double taxation of income derived by a corporation, the tax it pays on its income is imputed to the shareholder. Where a dividend is accompanied by an imputation credit, tax is payable on the gross dividend (dividend received plus imputation credits), with the imputation credits available to offset the tax. Imputation credits cannot be utilized by nonresident shareholders. However, dividend withholding payment credits, which arise from a withholding tax o
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