Tax Exemption

Article published in the United Kingdom, April 2012

Your move to New Zealand will naturally have tax consequences. Make sure you understand your obligations under New Zealand tax laws before you emigrate to New Zealand and make the most of the advantages available to you as a new migrant moving from the UK to New Zealand.

New Zealand taxes its residents on their worldwide income and taxes non-resident on income from New Zealand sources. Personal income tax rates range from 10.5 percent to 33 percent. Goods and Services Tax (GST) of 15 percent applies to supplies of most goods and services. There is no generally applicable capital gains tax, although some provisions within the Income Tax Act operate to recharacterise gains as income and tax them accordingly. There are no estate or death duties and, as of October last year, no gift duty. All good reasons to emigrate to New Zealand!

Be aware that tax residence is distinct from residence for immigration purposes. You may be tax resident in New Zealand before you start to live in New Zealand permanently and even if you haven’t yet obtained your visa from immigration services.

You will become tax resident in New Zealand if you spend more than 183 days in New Zealand in any 12 month period or if you have a permanent place of abode in New Zealand. Where the 183 day test applies, your tax residence will be backdated to the first day you were personally present in New Zealand. In many cases, this might catch an exploratory trip or a brief visit to attend interviews for jobs in New Zealand.

You may have a permanent place of abode prior to your final move to New Zealand. A permanent place of abode requires some kind of enduring connection to the country. It is possible to have a permanent place of abode in New Zealand and in the United Kingdom, or elsewhere.

You may be deemed to be tax resident in two or more countries. In these cases, you will need to look at any applicable double tax treaty to determine which country will have primary taxing rights.

An important tax exemption applies to new migrants who move to New Zealand or New Zealanders returning after ten or more years abroad. If the transitional resident tax exemption applies to you, you will have a four-year window where income from non-New Zealand sources can be derived tax free. This allows you some time to try living in New Zealand and get your investment affairs in order before becoming fully subject to tax in New Zealand.

We recommend you seek tax planning advice as part of your move to New Zealand.

The above article is provided for general information purposes and does not constitute legal advice.

The partners at Jones Law are internationally qualified and practise in the areas of cross-border tax planning, estate planning and acquisition structuring.

We invite you to contact us at info@jones-law.co.nz to discuss your specific circumstances.

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