Repeal of Income Tax Exemption for Non-Resident Charities 

What is the proposed change?

• Non-resident charities can currently receive an income tax exemption on New Zealand-sourced non-business income, such as interest, dividends, and rental income. 

• The proposed change would remove this tax exemption for non-resident charities. 

• Change would apply from 1 April 2028

Why is this change needed?

• There isn’t a reason to provide tax exemptions to non-resident charities that do not benefit people in New Zealand.

• Other non-resident entities are already taxed on their New Zealand-sourced income.

Who would this affect?

• Approximately 350 entities have historically applied for this approval, although it is unclear how many still invest in New Zealand.

• These entities are mainly universities, religious organisations, and private charitable foundations that are tax-exempt in their home countries.

• Most are based in the United States, United Kingdom, and Australia. 

What would this mean for non-resident charities?

• Non-resident charities with a strong connection to New Zealand may still qualify for income tax exemption by registering under the Charities Act 2005.

• Non-resident charities without charitable activities in New Zealand would generally be subject to non-resident withholding tax on New Zealand-sourced non-business income, such as interest, dividends, and royalties. 

• For interest income, they may instead choose to pay approved issuer levy (AIL) at 2%.