Tax & Immigration Considerations

When Moving to New Zealand

Immigration Strategies

There are usually numerous available strategies to achieve permanent residence in New Zealand.

For investors, these range from the “Active Investor Category” through to the Long Term Business Visa route to permanent residence.

It is critically important to assess the relative cost of each strategy, measured not only in monetary terms but also in terms of risk, physical presence required in New Zealand and English language requirements.

A thorough analysis of all the available options is essential prior to implementing a migration strategy.

New Zealand Tax Landscape

The main taxes in New Zealand are the income tax, which applies to worldwide income of New Zealand tax residents, and goods and services tax (GST), which is a sales tax passed on to consumers and is generally applied to all goods and services with few exceptions.

New Zealand has no death duty or estate taxes, no stamp duty or transfer duty on property transfers and no generally applicable capital gains tax.

New Migrant Tax Exemption

New migrants to New Zealand and New Zealanders returning after an absence of 10 years or more may be able to benefit from the transitional resident tax exemption, which applies to foreign sourced income derived by new migrants for a period of up to four years after you first become resident in New Zealand.

To maximise the effect of the transitional resident exemption, care should be taken to ensure that the start date of your residence in New Zealand is not unintentionally triggered earlier than expected. A person becomes tax resident in New Zealand if they have a permanent place of abode in New Zealand or if they are personally present for an aggregate of 183 days in any 12 month period.

With pre-migration planning, it may be possible to combine the benefits of using a trust structure to hold your assets with the transitional resident exemption. In order to achieve this dual objective, we recommend contacting us prior to your move to New Zealand.

New Zealand Trusts

A New Zealand discretionary family trust can be a useful estate planning tool. A trust involves a disposition of property by a person, called the settlor, to a person or persons, the trustees, who are instructed to hold that property for the benefit of others, the beneficiaries. There must be an express intention to establish the trust, it must be clear who the beneficiaries are and the trust property should be clearly identifiable. A trust will normally be set up by the execution of a trust deed, which records the terms of the trust and directs the trustees as to how they should administer the trust property.

There are three main reasons for the use of trusts in New Zealand: asset protection, estate planning and taxation benefits. By ceding legal title to the assets, a settlor of a trust may put his assets beyond the reach of his or her future creditors. A trust gives the settlor power to control distributions to the beneficiaries and is therefore useful as an estate planning tool. The generous features of New Zealand’s relationship property laws may operate to allow even an unmarried partner to walk away with half of the family assets after a relatively short period of time. It is important that you understand the scope of these laws and protect your and your family’s wealth from unexpected threats.

Various tax benefits are available through the use of a trust. By placing income producing assets in a trust, the settlor can effectively transfer income from him or herself to persons that may be taxed at a lower marginal tax rate, although special rules apply to distributions to beneficiaries under the age of 16.

New Zealand Foreign Trusts

New Zealand operates a foreign trust regime which can prove beneficial for many non-residents. Foreign sourced income derived by a New Zealand resident trustee of a trust which does not have a New Zealand resident settlor will not be taxable in New Zealand. The unusual nature of the foreign trust definition, in particular, is that it allows for the trustees of the trust to be resident in New Zealand, which gives rise to certain advantages relative to other jurisdictions. This feature can often provide a useful tool in taxation planning, especially where the settlor is resident in a jurisdiction that only taxes trust income derived by resident trustees.

Capital Gains Pitfalls

New Zealand does not have a generally applicable capital gains tax, but the tax laws contain many provisions which recharacterise capital gains as income and tax them accordingly.

Simply having money in the bank can expose you to tax on foreign exchange movements on an unrealised basis, if you exceed the relevant thresholds.

Gains from land transactions will generally remain outside the tax net, unless one of the myriad of exceptions apply to your situation, such as development or improvement activities, gains from a change in the resource rules applying to the land, acquiring the land as part of a business or for the purpose of disposal, or simply being associated to someone in the building business.

Non-New Zealand shares, pension investments and insurance policies all fall under the foreign investment fund rules and could potentially be subject to tax based on an assumed increase in value, notwithstanding that you may not have actually received any income from your investment.

Double Tax Agreement

It is common for people moving between countries to be treated as tax resident in two or more places. A double tax treaty may operate to ensure that you are not taxed twice on your income.

Common Business Structures

Investment into New Zealand can be done through a variety of vehicles, such as a limited liability company, unit trust, joint venture, partnership, limited partnership or the recently introduced look-through company. For managed fund investments, portfolio investment entities can offer significant tax savings. Whether you intend to invest into an established business or start up your own, we are able to work with you to help determine which structure is right for you.

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Jones Law

New Zealand
About Jones Law

We provide tailored legal solutions to ensure that your wealth is protected and your investments and family affairs structured to provide optimum asset protection, control and tax efficiency.

Whether you are about to embark on a new investment project, are considering moving yourself and/or your wealth to New Zealand, or if you would like a legal health check of your personal or business affairs, we invite you to contact us to discuss your needs.

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+64 9 486 0950 400 Lake Road, Takapuna, Auckland
PO Box 33 196, Takapuna, 0740,