Taxes are a crucial component of a country’s international competitiveness.
New Zealand on second place of OECD's most competitive tax systems
In today’s globalized economy, the structure of a country’s tax system is an important factor for businesses when they decide where to invest, how much to invest, and which types of operations to locate in which countries.
Structure and rate of corporate taxes, cost recovery of business investment, property taxes, income taxes, and tax rules for foreign earnings are some of the factors that determine the competitiveness of a tax system in comparison to other countries.
In response to global trends, New Zealand cut its top individual income tax rate from 38 percent to 33 percent, shifted to a greater reliance on the goods and services tax, and cut its corporate tax rate to 28 from 30 percent. New Zealand added these changes to a tax system that already had multiple competitive features, including no inheritance tax, no general capital gains tax, and no payroll taxes.
A big attraction if you’re considering living in NZ is the tax concession on overseas investment income & pensions that applies for your first four years of living here.
The Inland Revenue Department, IRD
You do not have to be a New Zealand citizen or resident to have an IRD number. You need to apply for one if you:
- are in New Zealand on a visa with work rights
- intend to work, and
- you do not already have an IRD number.
A pay-as-you-earn tax (PAYE) is a withholding tax on income payments to employees.
Income tax rates for individuals and ACC earners' levy rates
Tax residency and status
What income is taxable in New Zealand
New Zealand taxes income on both a residency and a source basis.
New Zealand residents
If you are a resident of New Zealand for tax purposes, you will be taxed in New Zealand on all of your "worldwide income". This is income derived from New Zealand as well as income derived from all other countries.
Your worldwide income includes any income that you derive in a foreign country even if you do not bring the money into New Zealand. For example, your worldwide income could include:
- an amount of interest you derive from funds you have in an offshore bank account
- rental income
- salary and wages paid both by New Zealand companies and offshore companies
- foreign pensions
If you have derived overseas income that has also been taxed in the overseas country, you may be entitled to a credit for the tax already paid. The available credit is limited to the lesser of tax payable in New Zealand on the income or the tax paid offshore. This is an attempt to ensure that the same income is not taxed twice.
New Zealand source income
New Zealand will also tax income derived by a non-resident if it has a New Zealand source. This is known as source based taxation.
Generally, income will have a New Zealand source if it has a connection with New Zealand. Some examples of incomes with a New Zealand source include:
- income derived from employment performed in New Zealand even if the employer is a non-resident
- pensions paid by the New Zealand government
- dividends paid by New Zealand companies.
Double tax agreements
A double tax agreement may remove New Zealand's right to tax a particular type of income.
Find out if you are a New Zealand tax resident or an overseas tax resident and what that means.
Ask our Business and Investor Migration Expert
If you want to find out more about investing in New Zealand, contact Dr Carsten Hallwass, the Business and Investor Migration Adviser in our team.Contact Dr Hallwass