MOVING TO NEW ZEALAND
" Death, taxes and childbirth! There's never any convenient time for any of them. "
- Margaret Mitchell, Gone with the Wind
TAX CONSIDERATIONS
WHEN MOVING TO NEW ZEALAND
NEW ZEALAND TAX LANDSCAPE
The main taxes in New Zealand are income tax, which applies to worldwide income of New Zealand tax residents, and goods and services tax (GST), which is a sales tax passed on to consumers and is generally applied to all goods and services with few exceptions.
New Zealand has no death duty or estate taxes, no stamp duty or transfer duty on property transfers and no generally applicable capital gains tax.
NEW MIGRANT TAX EXEMPTION
New migrants to New Zealand and New Zealanders returning after an absence of 10 years or more may be able to benefit from the transitional resident tax exemption, which applies to foreign sourced income derived by new migrants for a period of up to four years after you first become resident in New Zealand.
To maximise the effect of the transitional resident exemption, care should be taken to ensure that the start date of your residence in New Zealand is not unintentionally triggered earlier than expected. A person becomes tax resident in New Zealand if they have a permanent place of abode in New Zealand or if they are personally present for an aggregate of 183 days in any 12 month period.
With pre-migration planning, it may be possible to combine the benefits of using a trust structure to hold your assets with the transitional resident exemption. In order to achieve this dual objective, we recommend contacting us prior to your move to New Zealand.
NEW ZEALAND TRUSTS
A New Zealand discretionary family trust can be a useful estate planning tool. A trust involves a disposition of property by a person, called the settlor, to a person or persons, the trustees, who are instructed to hold that property for the benefit of others, the beneficiaries. There must be an express intention to establish the trust, it must be clear who the beneficiaries are and the trust property should be clearly identifiable. A trust will normally be set up by the execution of a trust deed, which records the terms of the trust and directs the trustees as to how they should administer the trust property.
There are three main reasons for the use of trusts in New Zealand: asset protection, estate planning and taxation benefits. By ceding legal title to the assets, a settlor of a trust may put assets beyond the reach of his or her future creditors. A trust gives the settlor power to control distributions to the beneficiaries and is therefore useful as an estate planning tool. The generous features of New Zealand’s relationship property laws operate to allow even an unmarried partner to walk away with half of the family assets after a relatively short period of time. It is important that you understand the scope of these laws and protect your and your family’s wealth from unexpected threats.
Various tax benefits are available through the use of a trust. By placing income producing assets in a trust, the settlor can effectively transfer income from him or herself to persons that may be taxed at a lower marginal tax rate, although special rules apply to distributions to beneficiaries under the age of 16.
NEW ZEALAND FOREIGN TRUSTS
New Zealand operates a foreign trust regime which can prove beneficial for many non-residents. Foreign sourced income derived by a New Zealand resident trustee of a trust which does not have a New Zealand resident settlor will not be taxable in New Zealand. The unusual nature of the foreign trust definition, in particular, is that it allows for the trustees of the trust to be resident in New Zealand, which gives rise to certain advantages relative to other jurisdictions. This feature can often provide a useful tool in taxation planning, especially where the settlor is resident in a jurisdiction that only taxes trust income derived by resident trustees.
COMMON BUSINESS STRUCTURES
Investment into New Zealand can be done through a variety of vehicles, such as a limited liability company, unit trust, joint venture, partnership, limited partnership or look-through company. For managed fund investments, portfolio investment entities can offer significant tax savings. Whether you intend to invest into an established business or start up your own, we are able to work with you to help determine which structure is right for you.