|NZ Introduces Property Tax Reform Bill|
New Zealand introduced a tax bill on November 16, 2015, for a new withholding tax on sales of residential property by people who live overseas and go on to sell the property within two years of purchase.
The proposed measure is the third part of the Government's investment property tax reforms announced as part of Budget 2015.
Revenue Minister said the proposed residential land withholding tax (RLWT), which is included in the Taxation (Residential Land Withholding Tax, GST on Online Services, and Student Loans) Bill will act as a collection mechanism for the proposed new bright-line test, which applies to gains from the sale of residential property purchased on or after October 1, 2015, and sold within two years.
The RLWT will apply when the property being sold is located in New Zealand and defined as "residential land" under the bright-line test provisions; the seller acquired the property on or after October 1, 2015, and has owned the property for less than two years before selling it; and the seller is an "offshore person."
Under the proposed measures in the bill, an "offshore person" would include people who are not New Zealand citizens; people who do not hold residence class visas; and New Zealand citizens and residence class visa holders who have been away from New Zealand for a significant period of time (three years in the case of New Zealand citizens).
New Zealand trusts and companies may also be considered "offshore persons" if they have significant offshore interests in them.
The bill proposes that the obligation to pay the RLWT will primarily be the responsibility of the seller's conveyancing agent or, in their absence, the purchaser's conveyancing agent or, in the absence of both, directly by the purchaser.
The proposed changes were announced by the Government in Budget 2015 as part of a package of proposals to improve compliance with the current land sale rules, and were consulted on earlier this year.
The RLWT will come into force on July 1, 2016, following enactment of the Taxation (Residential Land Withholding Tax, GST on Online Services, and Student Loans) Bill.
The opinions expressed do not constitute investment advice and specialist advice should be sought about your specific circumstances.
Published on our website on Dec.09, 2015