Asset Ownership in New Zealand: What Structures?
Are you a non resident looking to invest in New Zealand?
If so, you will need advice on the tax implications before you invest. Looking at property investment for example, income derived from property situated in New Zealand is taxable here as the income is sourced here. This is according to New Zealand domestic law – which sometimes can be overridden by double tax agreements. However, in the case of most of the double tax agreements that New Zealand has, the right to tax income off land situated here is preserved.
Given that there is income that is taxed here, the next questions are how is the amount of taxable income calculated and what is the relevant tax applicable? This is where you need advice. There are different rules that apply to inbound investors including thin capitalisation rules that limit the amount of interest that can be deducted in certain circumstances to calculate what the ultimate taxable income is.
The tax rate applicable depends on the ownership structure chosen. There are different tax rates for individuals, companies and Trusts. As a general rule we advise our inbound investors to stay away from company structures as they often lead to double taxation. To illustrate, a company taxable on profit produced in New Zealand will then distribute a dividend to its offshore shareholders. Often the country of residence for the offshore shareholder does not permit a tax credit to be claimed by the shareholder in relation to the dividend when the tax has been paid by the company in New Zealand. In other words, there is a mismatch between the income at shareholder level and the tax liability at company level in New Zealand.
Contact us at GRA if you are contemplating inbound investment into New Zealand and we can help you work through these issues.
New Zealand Accountants
