Taylor Scott International News
A new withholding tax on sales of residential property in New Zealand by people who live overseas and go on to sell the property within two years of purchase will be introduced in 2016. The Residential Land Withholding Tax (RLWT) is the third part of the Government’s investment property tax reforms announced as part of its Budget 2015. It will come into force on 01 July 2016 under a new Bill before Parliament. Revenue Minister Todd McClay said that the RLWT will act as a collection mechanism for the new bright-line test, which applies to gains from the sale of residential property purchased on or after 01 October 2015 and sold within two years. ‘The proposed RLWT will ensure the integrity of the tax system and will bring the collection of bright-line tax into line with other withholding taxes, which generally apply when there is likely to be a tax liability and collection may be difficult,’ he explained. RLWT will apply when the property being sold is located in New Zealand and defined as residential land under the bright-line test provisions; when the seller acquired the property on or after 01 October 2015 and has owned the property for less than two years before selling it; and the seller is an offshore person. 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. ‘Unlike the bright-line test there is no exception for the seller’s main home under the proposed new RLWT rules. As the withholding tax would only apply to a person living overseas, it is unlikely that the New Zealand property being sold would be the person’s main home,’ said McClay. The Bill does, however, propose an exemption from RLWT for transfers upon death, and for transfers made in relation to a property relationship agreement, in keeping with the bright-line test. The Bill also proposes that the obligation to pay the RLWT will primarily be the responsibility of seller’s conveyancing agent or in their absence, the purchaser’s conveyancing agent and in the absence of both, directly by the purchaser. ‘The RLWT proposal in the bill, together with the new bright-line test and changes to collect better tax information about buyers and sellers of residential property will help to ensure that everyone pays their fair share of tax on gains from property sales,’ added McClay. Taylor Scott International
Taylor Scott International, Taylor Scott
