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New Zealand Tax Overview
Knowing the differences that separate one country’s tax system and laws from another’s can sometimes feel overwhelming. But those differences often play a key role in helping companies decide whether to relocate or expand their business to another country.
This article will examine three different aspects of New Zealand’s tax laws, namely personal taxes, corporate taxes, and VAT taxes.
Here’s everything you need to know about personal taxes in New Zealand:
People are deemed residents of New Zealand if they have a permanent place of abode in New Zealand regardless of how long they have lived outside New Zealand.
They may also be deemed residents of New Zealand if they have been present in New Zealand for a period exceeding 183 days in any 12-month period.
Non-residents are exempt from personal income tax if all the following apply:
- Visits do not exceed a period of 92 days in the income year
- The non-resident is liable for income tax on New Zealand-sourced income in their country of residence
- The person paying the employee/contractor is not based in New Zealand
A non-resident can seek relief from New Zealand tax if a DTA exists between New Zealand and the country in which the employee is a tax resident. To obtain relief under the treaty, individuals must meet three conditions:
- The recipient is present in New Zealand for less than 183 days in any 12-month period
- Remuneration is paid by, or on behalf of, a non-resident employer
- Payment is not incurred by a permanent establishment (branch), or a fixed base, that the employer has (or is deemed to have) in New Zealand
The tax rate in New Zealand is progressive. It begins at 10.5% for income earned up to NZD 14,000. Additional tax brackets are 17.5%, 30%, 33%, and 39%.
Tax rates apply to income earned worldwide for New Zealand residents. Non-residents are subject to tax only on income from sources in New Zealand.
There is no defined capital gains tax in New Zealand. However, gains on property and other investments are taxed according to personal income tax rates if they are held for under a certain period of time. For example, gains on the sale of real estate are taxed at personal income tax rates if the property is held for less than ten years.
Here’s everything you need to know about corporate taxes in New Zealand:
New Zealand corporations are considered residents if they meet any of the following:
- The place of incorporation is New Zealand
- The location of head office is in New Zealand
- The center of management is New Zealand
- Directors exercise control of the company
Non-resident companies are taxed on their New Zealand-sourced income.
The corporate tax rate for New Zealand is a flat 28%. All resident corporations are subject to corporate tax. Non-resident companies are taxed on their New Zealand-sourced income, subject to any DTA.
New Zealand considers all money earned in New Zealand to be taxable income, as well as money earned worldwide by resident corporations. Taxes are assessed on gross income, and businesses can use a few deductions to lower that amount.
New Zealand has a variety of double tax agreements that allow for foreign tax credits on tax paid to foreign countries. There are also a few incentives for corporations that allow for R&D tax credits of 15% on expenses for activities that seek to resolve a technological or scientific uncertainty.
Value-added taxes, better known as VAT taxes, are a common form of consumption tax. The value-added portion is the difference between a company’s sales and its cost of purchasing services or goods from another company. Here’s what you need to know about VAT taxes in New Zealand:
New Zealand has a goods and service tax, or GST tax. The GST tax is applied to almost all goods and services exchanged in the country. The tax applies when goods are imported, as well.
However, not all goods are taxed. Financial services are exempt, as are exports.
The GST tax rate is a flat 15%, and unlike many other countries, there are few to no exceptions for reducing that tax rate, with the exception of financial services and exports.
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