How Does Tax Residency For Companies In New Zealand Work
TAX RESIDENCY FOR COMPANIES
A COMPANY IS CONSIDERED A NZ TAX RESIDENT IF ANY ONE OF THE BELOW CRITERIA ARE MET –
- It is incorporated in New Zealand.
- It has its head office in New Zealand (a physical place of administration or management which is superior to all others)
- Centre of management is in New Zealand
- Control by company directors is exercised in New Zealand.
There can be instances where a company may be a resident in New Zealand as well as other countries. In these instances, the DTA agreement between the two countries will come into picture.
Mostly, the DTA’s provide that a non-resident company with a permanent establishment in New Zealand will be subject to New Zealand tax on income derived in NZ.
WHAT CONSTITUTES A PERMANENT ESTABLISHMENT?
This is a fixed place where the business activity is wholly or partly carried on. It could be a branch, office, factory, workshop or a project site.
Even carrying on supervisory activities in connection with a construction site, exploration of natural resources, using substantial equipment in New Zealand in excess of 6 months or exploitation of standing timber may be considered permanent establishment.
However, if the site in New Zealand is only used for
- storage, display or delivery of goods
- maintenance of goods used for the above
- maintenance of goods that belongs to the company but used by another entity
- purchase of goods or collecting information
- activities of supporting nature such as advertising or research,
it is not considered a permanent place of establishment.
DTA WITH AUSTRALIA
Inland Revenue and the Australian Taxation Office have agreed an administrative approach under which eligible taxpayers can self-determine their residence without the need to apply for a determination. This approach is designed to reduce compliance costs for eligible taxpayer.
*Please note that the above article only intends to capture the salient points regarding the company tax residence in New Zealand and does not constitute a tax advice. If you have specific questions regarding your situation, please reach out to us through the contact us option.
Please note that the above does not constitute specific tax advice and only intends to be a general advice. If you require specific advice related to your situation, please reach out to our tax consultant using the ‘contact us’ option.
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