19 May 2012
Taxation in New Zealand
Taxes in New Zealand are collected by the Inland Revenue Department, more commonly known as the IRD.
The standard New Zealand income year is from 1 April to 31 March, although businesses and employee/shareholders may adopt a different balance date to suit business needs.
The main taxes in New Zealand are Income Tax and Goods and Services Tax (GST), a value added tax. Levies for the universal accident and injury compensation programme, ACC, are also paid by all businesses, employees and motor vehicle owners.
There is no capital gains tax in New Zealand. However you do have to pay Resident Withholding Tax (RWT) on interest earned from your investments. This is usually deducted by the investing organisation before dividends or interest is paid. Dividend payments may also benefit from imputation tax which lets companies pass on to their shareholders the benefit of the New Zealand income tax they have already paid.
Paying tax
Employees in New Zealand generally pay their taxes as they earn their income, under the pay-as-you-earn (PAYE) scheme.
If you are self-employed, for instance as a sole trader or investor, you can deduct tax from your income yourself, by making scheduled tax payments to the IRD throughout the year. Or pay annually at the end of the tax year when you complete your income tax return. All self-employed people must file these once a year.
If you operate in a partnership, the partnership itself does not pay income tax. Instead it distributes the partnership income to the partners. The partners then pay tax on their own share.
Business operators need to make tax payments for
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income tax
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goods and services tax
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PAYE and other deductions from employees' wages
If you have a business or taxable activity in New Zealand, you may also need to be Goods and Services Tax (GST) registered. GST is a tax that you collect on behalf of the government as a charge on your sales and income. GST can also be claimed back for your purchases and expenses. Depending on the difference between GST earned or paid, the business either makes a GST payment or receives a GST refund.
Tax rates
Tax rates are scaled, depending on your level of income. The current tax rates in New Zealand are:
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Taxable income
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PAYE rate for every $1 of taxable income (excluding ACC earner’s levy)
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Up to $14,000
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10.5 cents
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$14,001 to $48,000
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17.5 cents
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$48,001 to $70,000
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30 cents
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$70,001 and over
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33 cents
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No notification
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45 cents
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Company tax
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30 cents
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Tax on income from overseas
If you’re going to be here for more than 183 days within a 12-month period or have an ongoing relationship with New Zealand, you’ll become a New Zealand tax resident – even if you’re already a tax resident in another country.
To prevent you being taxed twice, New Zealand has negotiated 35 double tax agreements (DTAs) with countries which are our main trading partners. These establish which country has the first or sole right to tax certain types of income, and eliminate certain forms of double taxation.
Temporary tax exemption on foreign income
When you become a new tax resident of New Zealand, you can benefit from a temporary tax exemption on your foreign income.
The temporary tax exemption for foreign income is for four calendar years (up to 49 months). The exemption starts on the first calendar day of the month you qualify as a tax resident in New Zealand and is valid until the last calendar day of that month four years later.
For more information about this important advantage for investors and business people coming to New Zealand see www.ird.govt.nz.
Apply for IRD number online
As a starting point for paying tax in New Zealand, you’ll need an IRD number. An IRD number enables you to pay tax in New Zealand and is unique to each individual .You can apply for an IRD number online, and will need:
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Photo identification
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An overseas passport with New Zealand immigration visa
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An International Driver’s Permit or Overseas Drivers Licence.
For more details, and in depth information about tax in New Zealand, see www.ird.govt.nz
