Christchurch

Taxation in Christchurch, New Zealand

What are the tax rates in Christchurch, New Zealand? How are corporations taxed? Here’s Teleports overview of personal, corporate and other taxation topics in Christchurch, New Zealand.

Personal taxation in Christchurch

Effective personal income tax rate

Annual income$25,000$40,000$80,000$125,000$200,000
Rate15%18%25%28%30%

Teleport city rankings for personal income tax

Personal taxation puts Christchurch in position 73 of all Teleport Cities.
WORSTBEST

Basis

New Zealand resident individuals are taxed on their worldwide income, with a foreign tax credit available for foreign income tax paid. The amount of the foreign tax credit available is for the lesser of New Zealand income tax payable or the amount of foreign tax paid. Conversely, nonresidents of New Zealand are taxed only on New Zealand-source income.

Residence

An individual is resident for New Zealand tax purposes if he/she has a permanent place of abode in New Zealand or has been in New Zealand for more than 183 days in any 12-month period. An individual who is a first-time resident (or who is a returning New Zealander who has been nonresident for more than 10 years) may qualify to be a transitional resident. In that case, the individual generally will be taxable on only his/her New Zealand-source income and worldwide income from personal services for 48 months from the date he/she becomes resident (the start date may vary).

Filing status

See “Taxable income,” below.

Rates

Progressive rates up to 33%. There is no tax-free threshold.

Deductions and allowances

Wage and salary earners generally are not permitted to claim deductions against employment income. Some rebates of tax may be claimed back (charitable donations). For members of partnerships and sole traders not registered as companies (i.e. the self-employed), the same deductions apply as for corporate tax, except that FBT does not apply to benefits provided to the proprietor and the costs of providing the benefits are unlikely to be

Taxable income

Tax is deducted at source for wage and salary earners. Most individuals are subject to pay-as-you-earn (PAYE) deductions from their employment income and resident withholding taxes on certain passive income, and are not required to submit annual income tax returns. Taxpayers with other types of income, such as business income, certain capital gains and passive income are required to submit annual income tax returns. Joint returns are not permitted.

Capital gains

There is no capital gains tax in New Zealand. However, certain gains arising from the disposal of personal property that are related to a person's business and property purchased with the intention of resale are taxable. Gains on the sale and transfer of land may be taxable in certain circumstances (including land acquired with the purpose or intention of disposal). Additionally, from 1 October 2015, gains from the sale of residential property that is sold within two years of being bought (with an exception for the family home) are taxable.

Other taxes on individuals

Real property tax

Local authorities charge rates on land based on the official valuation of land. The rates vary considerably from one locality to another. Rates collected are used to fund local city services, waste collection, local roads and the provision of parks, community facilities and activities.

Social security

KiwiSaver is a voluntary, work-based savings scheme. The minimum employee contribution rate is 3% of gross pay. The compulsory employer contribution rate is 3% of an employee’s gross pay. The government also will contribute a “member tax credit” in relation to an employee member’s contribution over an annual period at a rate of NZD 0.50 for each NZD 1 contributed by members, up to a maximum limit of NZD 521.43.

Compliance for individuals

Penalties

A range of penalties and “use of money” interest may apply for failure to comply with tax laws. Use of money interest generally is payable on over and underpayments of taxes, at rates that encourage taxpayers to pay taxes on time.

Filing and payment

Tax on employment income is withheld by the employer under the PAYE system and remitted to the tax authorities. Income not subject to PAYE is self-assessed, in which case the individual must file a tax return.

Corporate taxation in Christchurch

Teleport city rankings for corporate income tax

Corporate taxation puts Christchurch in position 65 of all Teleport Cities.
WORSTBEST

Basis

Resident companies are taxed on worldwide income; nonresident companies are taxed only on New Zealand-source income. As a general rule, tax rates and tax treatment are the same for all companies, including branches of foreign companies. Certain companies may elect look-through tax status, and certain companies and collective investment vehicles can choose to be taxed as a portfolio investment entity (PIE).

Taxation of dividends

New Zealand operates a full imputation system, under which the payment of company tax is imputed to shareholders and the shareholders are relieved of their tax liability to the extent profits have been taxed at the corporate level. Dividends received by a company from a wholly owned group member generally

Residence

A company is resident if it is incorporated in New Zealand, its head office or center of management is in New Zealand or control of the company by its directors is exercised in New Zealand.

Losses

Losses may be carried forward indefinitely, subject to a 49% continuity of ultimate share ownership requirement. Losses also may be offset against the profits of other group companies, where the companies are at least 66% commonly owned at all relevant times. It generally is possible to carry forward part-year losses (which may occur if there is a lapse in shareholder continuity during the year). Losses may not be carried back.

Incentives

There are no specific incentive schemes, but tax legislation provides some industry-specific concessions and rules for farming, forestry, research and development, environmental protection, venture capital and film production.

Foreign tax credit

A foreign tax credit may be allowed against New Zealand income tax applicable to foreign income, but the credit is limited to the lesser of the actual foreign tax paid on the foreign income or the New Zealand tax applicable to that income.

Taxable income

Taxable income is calculated by subtracting allowable deductions from assessable income. Assessable income from carrying on a business normally includes gross income from the sale of goods, the provision of services, most dividends, interest and royalties. Deductions are allowed for expenses incurred in gaining assessable income or conducting business for the purpose of gaining or producing assessable income for any income year.

Capital gains

There is no capital gains tax in New Zealand, although certain gains arising from the disposal of personal property that are related to a business and property purchased with the intention of resale are taxable. Gains on the sale and transfer of land may be taxable in certain cases. Additionally, from 1 October 2015, gains from the sale of residential property that is sold within two years of being bought (with an exception for a family home) are taxable.

Other taxes on corporations

Real property tax

Local authorities charge rates on land based on the official valuation of land. The rates vary considerably from one locality to another. Rates collected are used to fund local city services, waste collection, local roads and the provision of parks, community facilities and activities.

Social security

An employer may be required to contribute a percentage of an employee’s gross salary or wages to the KiwiSaver superannuation scheme, for employees that have opted into the scheme.

Other

An employer is required to pay fringe benefits tax (FBT) on the value of fringe benefits (e.g. motor vehicles and low-interest loans) provided to its employees, at a rate of up to 49.25%. Accident compensation premiums, local government property rates, road tax and the employer superannuation contribution tax also may be payable.

Compliance for corporations

Consolidated returns

The consolidation regime allows a wholly owned group of companies to be taxed as if they were a single company. Consolidation allows companies to file a single income tax return to simplify the tax affairs of the group.

Penalties

A sliding scale of penalties applies for abuse of the tax system. Penalties commonly are imposed for taking an unacceptable tax position or for not applying a reasonable standard of care, and attract a 20% penalty. The maximum penalty is for tax evasion and is 150% of the deficient tax and a prison sentence. In addition, unpaid tax will be subject to “use of money” interest.

Rulings

The Commissioner of Inland Revenue may issue a binding ruling in respect of the application of tax legislation and how tax laws may apply to a particular arrangement. There are four types of rulings: public, private, product and status.

Tax year

The standard tax year runs from 1 April to the following 31 March, although a company can apply to have a nonstandard balance date to align accounting and tax year-ends.

Other taxation in Christchurch

Goods and services tax

Filing and payment

GST returns must be filed monthly, bimonthly or every six months by each registered person, depending on the annual value of the supplies made. Generally, returns must be filed

Rates

The standard rate is 15%, unless supplies are exempt or zero-rated.

Taxable transactions

The Goods and Services Tax (GST) is a broad-based tax applied to the total value of goods and services, whether at an intermediate or final stage of supply, including imported goods and, in some cases, imported services. Entities that are registered for GST purposes generally may recover the GST paid on the inputs they have consumed in their taxable business operations.

Registration

Registration is compulsory for businesses whose annual value of supplies made in New Zealand exceeds NZD 60,000. However, a person carrying on a business may register for GST on a voluntary basis if it does not satisfy the turnover threshold.

Anti-avoidance rules

Other

Foreign Investment Fund (FIF) rules apply in relation to investments in foreign entities where the control and income interests of the New Zealand resident shareholders are lower than the CFC thresholds. Different methods are available to calculate attributable FIF income, depending on whether the investor has a portfolio (less than 10%) or a nonportfolio (between 10% and 50%) interest in the FIF. The active income exemption for CFCs applies to nonportfolio FIFs.

Transfer pricing

New Zealand’s transfer pricing rules apply to cross-border transactions between associated persons. The rules aim to prevent companies from avoiding taxes by fixing artificial prices in transactions with related companies in different tax jurisdictions. Covered international transactions are broadly defined, but include transactions involving tangible or intangible property, the provision of services and financing.

Disclosure requirements

Certain taxpayers in New Zealand are required to keep and retain adequate records. While there are no legislative requirements for a taxpayer to prepare, keep or retain transfer pricing documentation, it could be used as evidence of compliance with the “arm’s length principle.” There are other disclosure requirements under certain regimes (e.g. a person with an income interest of 10% or more in a CFC must make an electronic disclosure of the interest).

Controlled foreign companies

Certain foreign income may be attributed to New Zealand resident shareholders. A foreign company is a CFC if a group of five or fewer New Zealand residents has a control interest of over 50% in the company or, in certain circumstances, where a single New Zealand resident has a control interest of 40% or more or where there is a group of five or fewer New Zealand residents that effectively control the company’s affairs.

Thin capitalization

Interest deductions claimed against New Zealand assessable income for inbound and outbound companies are limited where any entity’s debt exceeds a safe harbor debt-to-assets ratio (debt percentage). For inbound companies, interest will be apportioned (and the deductible portion will be limited) if the debt percentage of the New Zealand group is more than 60% and exceeds 110% of the debt percentage of the worldwide group. For outbound companies, interest will be apportioned if the debt percentage of the New Zealand group is more than 75% and exceeds 110% of the debt percentage of the worldwide group.

Investment basics

Accounting principles/financial statements

All Financial Market Conduct reporting entities, public entities, large companies and large overseas companies (as defined) that meet certain thresholds must prepare general purpose financial statements. The External Reporting Board (XRB) determines which accounting, auditing and assurance standards apply to which entities or sectors.

Principal business entities

These are the public and private limited liability company, partnership, limited partnership, trust, sole proprietorship and branch of a foreign corporation.

Withholding tax

Dividends

Dividends paid by New Zealand resident companies from profits already taxed at the corporate level may carry imputation credits for the tax paid. Dividends are referred to as “fully imputed,” “partially imputed” or “unimputed,” depending on the extent to which a company has chosen to use its imputation credits. Dividends paid to a nonresident are subject to a 30% nonresident withholding tax (NRWT) to the extent they are not fully imputed. Fully imputed dividends are subject to a 0% NRWT rate where the nonresident has a 10% or more voting interest in the company. In most other cases, the NRWT rate will be 15%. Rates may be subject to further reduction under an applicable tax treaty.

Other

Payments made to a nonresident for services that have been physically performed in New Zealand, or for the use of personal property in New Zealand, are subject to the 15% nonresident contractors' tax (NRCT), withheld at source (subject to exemptions). Payments of management fees to an associated company offshore often will attract an NRCT liability if offshore staff are physically performing management services in New Zealand.

Technical service fees

New Zealand generally does not levy withholding tax on payments of technical service fees, unless such services fall within the definition of royalties.

Interest

Interest paid to a nonresident is subject to a 15% NRWT, which may be subject to further reduction under an applicable tax treaty. New Zealand also has an approved issuer levy (AIL) regime that allows an approved issuer to pay a 2% levy instead of NRWT on registered securities where the parties are not associated.

Royalties

Royalties paid to a nonresident are subject to a 15% NRWT, which may be subject to further reduction under an applicable tax treaty.