Posted: 25/03/2010 By: Bill Singh (CA)

NEW ZEALAND A TAX HAVEN

Farfetched - not really. A book published by Tax Café and written by Lee Hadnum LLB ACA CTA on the world’s best tax havens lists New Zealand as a country that qualifies and so it should.

People who grumble about how much tax we pay don’t ever consider the taxes we don’t pay that are paid in most other developed countries. We don’t pay:

• Estate Duty
• Stamp Duty
• Capital Gains Tax

These are big number items especially towards the end of your working life. Let’s hope the Government does not get carried away and change this.

Transitional Resident

This is a new classification and anybody who has never lived here or someone that has lived here but has been overseas for more than 10 years qualifies as a transitional resident. If you qualify then;

· All your income from overseas that is not from personal services i.e. investment income is exempt from income tax as far as New Zealand is concerned for a period of 4 years .

Why would you not want to live here. So if you are from the United Kingdom and a transitional resident and you receive income from a Minerva SIPP then that income will be exempt from income tax in New Zealand for a period of 4 years.

If you are a transitional resident from the United States of America and you receive income from a Roth IRA or an IRA then you qualify for an exemption from income tax on that income for a period of 4 years.

As well as the above you are coming to a country with great people, breath taking scenery, a stable political system, world class education system and a safe and secure environment to bring up your family.

It is not often that chartered accountants sing the praise of the revenue services, and while acknowledging there could be improvements, we have one of the best in the world. The way the revenue service operates not only affects citizens when they pay tax, it affects most areas of the citizens life. More importantly revenue services can stifle or enhance business prosperity or development.

We have heard some horror stories of what happens overseas. While acknowledging that the Department could do it better (It would be the first to acknowledge this) generally it is courteous, professional and efficient in the way it deals with its citizens.

SO WHY WOULD YOU NOT WANT TO LIVE HERE

If Gulf Accountants can be of any assistance please give us a call.

Posted: 15/01/2010 By: Bill Singh (CA)

NEW ZEALAND TAX RESDENCY - INDIVIDUALS

There are three main parts of legislation to consider when dealing with tax residency of individuals:

· Notwithstanding any other provision of this section, a person is resident in NZ if that person has a permanent place of abode in NZ whether or not that person has a permanent place of abode outside NZ.

· Where a person is personally present in NZ for a period exceeding in total 183 days in any period of 12 months, the person is deemed to be resident in NZ from the first day that they were present in NZ.

· Where a person has been personally absent from NZ for a total of 325 days in any period of 12 months that person is deemed not resident in NZ from the first day of the 12 month period that the person was personally absent.

Note that the permanent place of abode test is the overriding test. The test of whether a person has a permanent place of abode is a matter of weighing all facts of a person’s circumstances. The nature and quality of a person’s connections with NZ is important.

e.g. A NZ resident is to work in the USA for a two year contract. He will not resign from his NZ job but will take a leave of absence. He will consider employment opportunities on USA and Europe at the end of two years as well as the option of returning to his NZ job. His family will travel with him and their Wellington house will be rented. 42 days notice of termination will need to be given under the Residential Tenancies Act. Personal property will be disposed of or taken with him to the USA. Electrical equipment unable to be used in the USA will be stored in Wellington. The only investment apart from the house is the Government superannuation Scheme, to which he will continue making contributions for 1 year.

Factors that would make him a non resident are;

• Period of absence being a significant length of time.
• Family going with him
• Personal property being taken with them.

Factors that would make him a resident are;

• Strong association with NZ despite his absence
• Job ready for him to take up should he decide to come back
• House available for him and his family to live in.
• His intention that he may come back to NZ to live
• Some personal property kept here.

In the CIR’s view the above would mean that he was a resident of NZ. If some of the factors changed such as his absence was for a period of 3 years then he may well be considered a non-resident.

Often there is no clear cut answer and minor facts could change the outcome.