Land transfer tax statement

You are now required by law to complete a Land transfer tax statement when you are buying or selling a New Zealand property.  Please see the statement for your reference.  A few notes regarding this statement:

  1. Information in this statement is passed on to the IRD.
  2. Information on this statement can be provided to overseas taxation authorities.
  3. Information in this statement must be retained for 10 years.

When completing this statement, please ensure the information provided is consistent with your other sources (e.g. information provided to the IRD when applying for an IRD number) to avoid any unnecessary confusions.

Non-resident offshore individual IRD No. application

Information regarding non-resident/offshore individual IRD number application

As you are aware, a non-resident/offshore person is now required to have an IRD number in order to buy and sale a New Zealand property.  Below is some information regarding non-resident/offshore individual’s IRD number application:

  1. You are generally required to have the following information for the application:
  • a completed and duly signed ir742 IRD number application – non-resident/offshore individual (IRD ir742 form)
  • a form of photographic identification, such as a passport or an overseas driver’s licence
  • proof of your current or most recent previous address, which may include a utility (eg, electricity or water) statement
  • national identity card or overseas driver’s licence (if not used as photographic identification)
  • proof of your New Zealand bank account confirming Anti-money laundering (AML) checks have been completed. A bank statement showing both deposits and withdrawals or a letter confirming the account has AML verification or that it is active will show this.
  • proof of your taxpayer identification number (TIN) of your most recent tax country/jurisdiction if you have one, eg, personal, national identity, tax or social security number. Provide a copy of a tax statement, ID card or page from your passport that shows this number.
  • proof of your intended activity in New Zealand, see the notes for Question 12 on page 2 of the ir742.
  1. If any of the above documents is in foreign language and has no English translation, the IRD generally require translation to English to be done by the New Zealand Internal Affairs Department.  You can email Internal Affairs at translate@dia.govt.nz, explain what you require and obtain translation pricing and timeframe.
  1. Once you have all the above information, you can email your application to the IRD at offshore@ird.govt.nz.  If your application is urgent, please ensure you state the reason why in your email.  It takes about 10 working days for the IRD to process a normal IRD number application and 2-3 working days for an urgent one.  Please ensure you allow sufficient time for possible delay during the process.

If you need to apply for an IRD number for a non-resident/offshore entity or you are not sure whether your entity is a non-resident/offshore entity, please contact us.  Particularly, if you need to apply for an IRD number for a trust that has an oversea settlor, trustee or beneficiary, please ensure you seek professional advice.

Land with a purpose or intention of disposal

Land acquired for a purpose or with an intention of disposal

On 25 February 2016, Inland Revenue released draft Question We’ve Been Asked PUB00260: “Income tax — land acquired for a purpose or with an intention of disposal” for consultation.

The item is about s CB 6 of the Income Tax Act 2007 (acquisition of land with a purpose or intention of disposal) and discusses when s CB 6 will apply.  The item considers that if land is bought for a purpose or with an intention of selling it, the proceeds of the eventual sale, whenever that occurs, will be income under s CB 6 unless one of two exclusions apply. The exclusions are as follows:

Exclusion 1 — residential land (s CB 6): If the land has a house on it, or you build one, and you occupy the house mainly as a residence, you will not be taxed on the proceeds from selling the property. This also applies if you are a trustee of a trust, and a beneficiary of the trust occupies the house mainly as a residence. Note: This exclusion does not apply if you have a regular pattern of acquiring and disposing of houses, or building and disposing of houses.

Exclusion 2 – business premises (s CB 19): If the land is the premises of a business, and you acquired and occupied the premises or built and occupied the premises mainly to carry on a substantial business from them, you will not be taxed on the proceeds from selling the property. Note: This exclusion cannot be used if you have a regular pattern of acquiring and disposing of, or building and disposing of, premises for businesses.

The item also confirms that the two-year “bright-line” rule is in addition to the other land sale rules that have been in New Zealand’s tax law for many years.  The 2-year rule is aimed at being easy to enforce, by removing the need to determine what a person’s purpose or intention was if they sell residential land within two years of acquiring it.  But if the 2-year rule does not apply, the proceeds from selling land can still be taxed under one of the other land sale rules, including the purpose or intention rule.

Rental property not permanent place of abode

The Court of Appeal has dismissed the Commissioner’s appeal from the High Court’s decision reported asDiamond v C of IR (2014) 26 NZTC. The Court of Appeal rejected the Commissioner’s argument that having a rental property “available” to the taxpayer was sufficient to amount to having a permanent place of abode in New Zealand.  The Court of Appeal noted that the focus was on whether the taxpayer, not members of the taxpayer’s family, had a permanent place of abode in New Zealand. The Court said that the fact that a taxpayer may provide a home for his or her family in circumstances where the taxpayer lives elsewhere would not necessarily be sufficient to establish that the taxpayer had a permanent place of abode in New Zealand.

This judgement will obviously help to reduce the uncertainly when considering whether a person is a New Zealand tax resident.