BY VIBHA VALLABH
New Zealand roughly the size of the United Kingdom, used to be this sparsely populated isolated country located in one corner of the world which was either unknown or considered insignificant to the wider world. This of course all changed when Hollywood came calling and used New Zealand as its film location inadvertently show casing the country to the world. Our secret was exposed, New Zealand’s scenery is truly spectacular, it is like what you see in the movies, no special effects required! Globalisation of course was inevitable but the film industry along with grim world events has attracted an increased interest in migration and direct investment into New Zealand.
For those of you who are considering returning home or migrating to New Zealand, it would be prudent to organise your affairs before arriving. Sounds simple enough but timing is everything.
If a person has been absent from New Zealand for a continuous period of 10 years (with no breach to the 183 days rule), all foreign sourced income (with a few exceptions) is exempt from tax in New Zealand for a period of 48 months. This can be extended for a further 12 months giving you a total of five years if you establish a New Zealand trust to hold those assets. This tax free holiday applies even if the income is remitted into New Zealand during that time but will not apply to income derived from employment or provision of services. Also unlike other countries, New Zealand does not have capital gains tax (with a few exceptions), inheritance tax, gift tax or stamp duty so your capital when brought into New Zealand will not be subject to these forms of taxes either. Any person who is considering returning to or migrating to New Zealand may still have ongoing tax obligations due to their citizenship or domicile status in another country, something to be mindful of when planning to migrant, however with careful planning and timing some of these can be mitigated.
If you are currently living offshore and do not plan on migrating immediately
and all your assets are located outside of New Zealand you may consider establishing an New Zealand foreign trust. No New Zealand tax is payable so long as the settlor and assets are located offshore. However if the Settlor relocates to New Zealand, they will have 12 months within which to choose whether the trust will be reclassified as a complying trust so that any income derived by the trust is taxed as trustee or beneficiary income. Otherwise if such election is not made within that time then the trust will be classified as a non complying trust whereby distributions of income and capital gains are taxed as beneficiary income or taxable distributions at a rate of 45%.
A person is considered a New Zealand tax resident and taxed on worldwide income if they are in New Zealand for more than 183 days in any 12-month period and haven’t become a non resident; or have a permanent place of abode in New Zealand; or are away from New Zealand in the service of the New Zealand government.
The following tax rates apply to resident individuals:
(i) Up to $14,000 10.5%
(ii) From $14,000-$48,000 17.5%
(iii) From $48,000-$70,000 30%
(iv) Over $70,000 33%
The company tax rate is 28%. Income earned by a trust is 33% unless it is distributed to beneficiaries in the same year it arises then their marginal rate will apply. Distributions of accumulated income and capital gains remain tax free.
Globalisation, technology and ease of travel to New Zealand no longer make it as remote as it used to be, the lifestyle would be enviable for the internationally mobile entrepreneur.
If you are considering returning to or migrating to New Zealand it would be to your advantage to do it with with careful planning and good timing.