Thinking of moving to New Zealand?
If you intend to move to New Zealand or have recently arrived, you need to be aware of legal issues that affect your ability to buy a home, and also your tax residence status which affects your tax liability in New Zealand, on foreign-sourced income.
We can assist you with the entire process, from obtaining your work visa and residence, right through to settling your tax status and purchasing a home.
Here are some common scenarios, along with some initial advice. However, everyone's situation is different. Therefore, please do get in touch, as it will be important to plan the process for you, starting as early as possible.
1. I have been in New Zealand for a year. I have a work visa and am not yet able to obtain residence because I have a work-to-residence visa and have to wait two years to apply. Can I buy a home to live in? What is my tax situation?
You can't buy a home in New Zealand to live in whilst you have a temporary visa, and you can't apply to the Overseas Investment Office for consent to buy a home to live in. However, as soon as you get residence, you should be able to buy a home, provided you have spent at least 183 days inside New Zealand in the last 12 months.
We recommend that you talk to us, as you may be able to apply for residence now. You don't necessarily have to wait the full two years to apply for residence, you might be eligible under the Skilled Migrant Category now.
If you become tax resident in New Zealand, going forward, you will be subject to personal tax in New Zealand on all forms of income you earn worldwide, such as dividends, interest and rental incomes, regardless of where your income is earned.
Don't forget that tax residence is a different concept with different timing considerations to your residence status for immigration purposes.
What tax exemptions are available to me?
There is an optional four year exemption from tax in New Zealand on foreign-sourced income if you have moved to New Zealand for the first time in at least 10 years. This exemption will effectively leave you subject to New Zealand tax only on income from your personal services, such as salary and wages, bonuses and employee share scheme benefits.
What is tax residence and when will I become tax resident in New Zealand?
If you have relocated to New Zealand you may be considered to be tax resident here from the time you started living here, despite not yet having permanent residence. Also, if you visited New Zealand prior to coming here to live permanently, this could cause you to become a tax resident from an earlier date, under what is called the 183 day rule. Therefore, there is a risk you may be tax resident in two countries.
This is where things can become really complicated and we strongly recommend you consult us to determine whether you have any relief from double taxation, under a treaty New Zealand may have with your home country.
We can assist you with understanding when your New Zealand tax residence commences, whether you should elect to apply the four year exemption, and what the implications are for you in relation to your worldwide income.
It can be tricky identifying your tax residence start date and therefore the timing of the four year exemption. Getting it wrong could expose you to interest and penalties on unpaid tax as well as trying to resolve a complicated issue with the New Zealand tax authorities.
2. I have just arrived into New Zealand. I have a work visa, but my partner is a Kiwi. Can we buy a home to live in? What is my tax situation?
Yes, you can. However, you need to ensure that the property is relationship property. This can create issues if you ever separate. Therefore, you will need to seek advice on this.
If you do not want to have the home as relationship property, we may be able to assist you in becoming a NZ resident soon, if you and your partner have lived together for a year. Once you are a NZ resident, and as long as you have spent at least 183 days inside New Zealand in the last 12 months, then there is no need for the home to be relationship property in order for you to buy a home to live in.
Again, you may be deemed to be tax resident from the time you arrived in New Zealand. Your tax position will be the same as outlined in first question above. If you are living here, with your Kiwi New Zealand partner, you are likely to be deemed to have a permanent place of abode in New Zealand and be tax resident from the time you started living here together. If this is the first time in 10 years you have been in New Zealand you may be entitled to the four year exemption. If you are still tax resident elsewhere you should consult with us on what the tax implications of this are.
3. I have recently arrived in New Zealand, but had a resident visa when I arrived. Can I buy a home to live in?
No, you can't buy a home to live in without consent until you have spent at least 183 days in New Zealand over the preceding 12 months.
However, as a holder of a resident visa you can apply to the Overseas Investment Office for consent to buy a home. We can help with this. The consent fee is $2,040.
Simple consents (not involving a company or trust) can take up to 10 working days. It's very important that any purchase agreement you sign is conditional upon you getting consent.
Your consent, if granted, will have conditions. Generally, the conditions will require you to:
live in the property as your main home; and
continue to hold a resident visa.
You will also need to provide the OIO with a statutory declaration that you intend:
to be present in New Zealand for at least 183 days in each 12 month period after consent is granted; and
if you are not already tax resident in New Zealand, to become tax resident in New Zealand from the point where you will have spent 183 days in New Zealand in the prior twelve months and to remain tax resident in New Zealand. Please note this is a different tax residence test to those mentioned in answer to the first question above.
What happens if I can't meet the conditions because I have to spend a lot of time outside of New Zealand?
If you don’t meet the conditions, you may be required to sell the land and/or face penalties or fines. However, a waiver can be applied for to deal with certain unexpected events. Again, we can help you with this. For example, if you need to go back home to look after a sick relative, a waiver can be applied for and granted.
If you need to sell the home, you may be taxed on any gains, if you don't meet the exemption requirements applying to a seller's "main home". This can happen where you have not spent sufficient time actually living in the property. In addition, if you lost your residence visa, by spending a lot of time outside of New Zealand, you may be deemed to be an "offshore vendor" and therefore be subject to "resident land withholding tax". The conveyancer would be obliged to withhold the tax amount from the sale proceeds and pay it to New Zealand Inland Revenue.
Do the conditions last forever? What happens if I become a New Zealand citizen?
If you sell the home, the conditions will cease to apply.
If you become a New Zealand citizen, you will also not be required to comply with the conditions any more. The same applies if you become "ordinarily resident in New Zealand". To be ordinarily resident, you must:
hold a resident visa; and
have been residing in New Zealand for at least the immediately preceding 12 months; and
be tax resident in New Zealand (in that you must have been present in New Zealand for 183 days in the preceding 12 months, noting that a permanent place of abode in New Zealand will not suffice for the purposes of this requirement); and
have been present in New Zealand for 183 days in the immediately preceding 12 month period.
4. I have set up a family trust in New Zealand. I've got a residence visa but I'm not ordinarily resident in New Zealand. Can the trust buy a home for me to live in?
Yes, you can apply for consent to buy a home to live in using a trust.
However, for consent to be granted, all persons who own or control the trust must be qualifying individuals. This means that they must be either New Zealanders, people who are ordinarily resident here, people who hold resident visas, or Australian and Singaporean citizens and permanent residents.
All the people who the Overseas Investment Office consider to own or control the trust will also be required to live in the house. This will definitely include the trustees and anyone who has the power to hire and fire the trustees or change the Trust Deed, and potentially also the beneficiaries of the trust.
There is an exemption from the requirement to live in the house, but it will depend on the circumstances and purpose of the investment and the Overseas Investment Office being satisfied that the person does not have any entitlement (or any potential entitlement, however remote) as a beneficiary under the Trust.
The Trust Deed therefore needs to be very carefully drafted to comply with the consent requirements and conditions. The fee for an application by a trust is $3,900 and getting consent will take longer than an application by an individual. Therefore, it pays to get it right from the beginning.
There are similar rules for companies wishing to acquire properties for an overseas person to live in. This is a very complex area of law, but we have the expertise to assist you through it.
Please contact Nicola Tiffen, Bridget Riley or Annelies McClure for further assistance.
Nicola has over 17 years' experience in the field of immigration law and regularly advises commercial businesses and individuals on a wide range of issues.
Bridget is an experienced tax advisor with over 20 years' experience. She has worked for both large accountancy and law firms and her experience across both disciplines enables her to fully comprehend the tax-related issues affecting business owners and individuals alike.
Annelies is widely acknowledged as New Zealand's foremost expert on the Overseas Investment Act having headed the Overseas Investment Office between 2005 and 2017.