Do You Have Contracts with Non-Resident Suppliers?

New Zealand imposes various taxes on non-residents who derive their income from New Zealand.  While the tax liability may ultimately fall on the non-resident, the tax legislation usually requires the New Zealand payer to deduct and account for the tax on behalf of the non-resident.

Below are some examples of payments to non-residents that may be subject to New Zealand tax:

1. Non-resident Contractors Tax (NRCT) is generally required to be deducted where the non-resident contractor has staff in New Zealand performing the contracted services.

1. NRCT is also generally required to be deducted where a New Zealand business leases equipment from a non-resident.

1. Non-Resident Withholding Tax (NRWT) is generally required to be deducted from any interest, dividends or royalties paid to non-residents.

• Insurance payments to non-resident insurers generally create a tax liability for the New Zealand payer.

If you have a contract with a non-resident and you are uncertain if there is a New Zealand tax obligation, please contact us to discuss further.

Are you Converting Overseas Amounts Correctly for New Zealand Income Tax Purposes?

The Inland Revenue publishes mid-month, month-end and average exchange rates from time to time.  These rates can be used to convert foreign currency amounts under the Controlled Foreign Company (CFC) and Foreign Investment Fund (FIF) regimes.

In addition, taxpayers can use the actual rate for the day of each transaction for the CFC and FIF calculations.

It is important to note that the exchange rate tables published by the Inland Revenue should not be used to convert overseas bank accounts, where transactions occur throughout any given month.  In this situation, taxpayers should use the actual exchange rate on the day of the transaction and should obtain this rate from a multicontributor page from Reuters or Telerate.  Alternatively, taxpayers can source the rate from the Reserve Bank’s website at

http://www.rbnz.govt.nz/statistics/exandint/b1/

If you have any questions regarding the correct method of converting overseas amounts to NZD, please contact us.

Other Matters

• GST and non-resident businesses: the Government is considering introducing measures to remove GST impediments for non-resident businesses.  Currently, not all non-resident businesses are able to GST register in New Zealand and so any GST incurred becomes a cost to that business.  The Government intends to introduce a GST registration system for non-resident businesses to claim back GST in a similar way to resident businesses.

• Mixed-use assets: The Government is to introduce a tax bill to legislate how assets that are used for both income-earning activities and privately should be taxed.  These proposed changes will affect assets such as holiday homes, planes, helicopters and boats and will likely lead to a significant reduction in tax deductions available where actual business use is minimal.

• Deducting ESCT from Employer Cash Contributions to Kiwisaver Schemes : From 1 April, you must deduct ESCT (employer  superannuation contribution tax) from any employer cash contributions you make to your employees' KiwiSaver schemes, complying funds or other superannuation funds. Depending on your employees' employment agreements you'll either need to deduct ESCT from the gross or the net employer cash contributions .  The ESCT tax rates are given below.

• Use of Money Interest Rate Changes: Use-of-money interest rates on underpayments and overpayments of tax changed from 8 May 2012.  The new rates are: