New Zealand Tax & Business Guide - Deloitte

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Basic facts
Population 4.2m Inflation 3.6% (2006)*
Main languages English, Maori GDP per head US$25,620*
Currency New Zealand dollar (NZD) GDP growth 1.7% (2006)*
Economic communities Asia Pacific Economic Co-operation, OECD, WTO
GDP sources 4.3% agriculture, 27.1% industry, 68.6% services
*Economist Intelligence Unit estimates.
Political environment

New Zealand is a parliamentary democracy in which the government holds executive power. The cabinet is presided over by the prime minister, currently Helen Clark of the Labour Party, who is appointed by the governor-general, who represents Queen Elizabeth II, on the basis of party strength in the House of Representatives.

The next general election is due by September 2008.
Foreign trade and investment
Exports US$23.1bn (2006)* Imports US$25.0bn (2006)*
*Economist Intelligence Unit estimates.

Leading export markets: Australia, the US and Japan.

Major exports: Dairy products, meat and forestry products.

The government generally welcomes foreign investment, and applications for approval are processed rapidly. Three sectors are earmarked for growthÛbiotechnology, information technology (IT) and creative industriesÛand support is available for companies that promote exports, research and development and regional development.
Business and financing
Business forms Limited liability company

Most businesses are similar in form to those in other developed economies.

The Companies Act of 1993 governs the creation of a company. An overseas company may operate through a branch. Branch registration costs are the same as those for a subsidiary but the required paperwork is more complex.

Auckland is the financial centre.
Labour environment
Unemployment rate 3.8% (2006)* Minimum wage NZD 10.25 (hourly)
*Economist Intelligence Unit estimate.

Union membership has dropped dramatically since 1991, when legal distinctions between unions and other groups seeking to represent employees were abolished.

The minimum wage is a flat rate across the economy, with one rate for adults (NZD 10.25 per hour) and a rate for employees aged 16 and 17 (NZD 8.20). The minimum wage for adults will increase to NZD 11.25 per hour, and that of young employees to NZD 9.00, from April 1st 2007. The minimum wage has been raised every year since 1999.

A new immigration programme has relaxed employment restrictions on foreigners: the talent visa scheme ensures that where an acknowledged skills shortage exists, accredited employers no longer need to prove that no New Zealander is available to fill the post.
Taxation
Corporate tax
Main rate 33%

Resident companies are taxed on worldwide income; non-resident companies are taxed only on New Zealand-source income. A company is resident if it is incorporated in New Zealand, if its head office or centre of management is in New Zealand, or if control of the company by its directors is exercised in New Zealand. Companies are taxed at a flat rate of 33% on aggregate income. Capital gains are generally not taxable. Foreign-source dividends are exempt from income tax but may be subject to withholding tax.
Individual tax
Progressive rates to 39%

Resident individuals are taxed on their worldwide income; non-residents are taxed only on New Zealand-source income. An individual with a permanent abode in New Zealand, or who is resident for more than 183 days in any 12-month period, is considered to be resident in New Zealand.

Individuals are taxed at progressive rates up to 39%. Dividends received are taxable, but there may be an imputation credit attached.
Capital gains
Capital gains are generally not taxed

There is no capital gains tax regime in New Zealand, but some types of gain may be still be subject to income tax. Gains on personal property that are related to a personÌs business, or where the property was bought for resale, could be taxed as business income. Gains on the sale or transfer of land may be taxable in certain circumstances.
Indirect tax
GST standard rate 12.5%

The goods and services tax (GST) applies to most transactions at a standard rate of 12.5%. Zero-rating applies to exports, international passenger transport and certain international services. Exemptions include certain financial and insurance services, residential rents and the sale of a building used for residential letting for at least five years before sale.

Registration is compulsory for businesses whose annual turnover is above NZD 40,000.
Tax administration and compliance
Tax year Corporations: year to March 31st; Individuals: year to March 31st

Companies may apply to use their accounting period as the tax period. Generally, corporate taxpayers must pay provisional tax in three instalments during the accounting period. Provisional tax is calculated on the assumption that the current-year liability will be 105% of the previous yearÌs tax charge, although it is also possible to estimate this liability. A tax return must be submitted by July 7th where the accounting period ended between October 1st and March 31st. For other accounting periods, the return must be filed by the seventh day of the fourth month following the end of the period. However, an extension of time arrangements may be granted. A final tax payment is due between five and eleven months after the end of the period, depending on whether an extension is granted.
Additional tax information
Withholding taxes Dividends 30% (to the extent not fully imputed), Interest 15%, Royalties 15%. Rates may be reduced by tax treaty.
Tax treaties New Zealand has concluded more than 30 tax treaties.
Dividends Dividends are generally taxable, and an imputation credit may be attached.
Revenue protection There is transfer-pricing, thin-capitalisation and offshore subsidiary (CFC) legislation. The foreign investment fund (FIF) regime applies to portfolio investments by individuals in offshore companies.
Groups Consolidated filing is possible.
Incentives Farming; mining; forestry; environmental protection; venture capital; film production.
Other taxes Accident compensation premiums, Cheque duty, Excise duty, Fringe benefit tax, Gift duty, Import duty, Local government property rates, Vehicle registration duty.