One of the most important reasons for foreign investors to open companies in New Zealand
is the taxation system
. At the end of the ‘80ies, the New Zealand
government enabled a simplified taxation system for companies which implies applying the corporate tax
for the worldwide incomes earned by local companies and various tax exemptions and reductions for foreign companies with activities in New Zealand in accordance with the double tax agreements the central authorities have signed.
How is the New Zealand corporate tax rate calculated?
The New Zealand corporate tax is applied based on the tax residency of a company. This means that in order to be subject to the corporate tax, a company must have a place of management or the head office in New Zealand. Companies that do not fulfill any of these requirements will be treated as a non-resident company and will be subject to the corporate tax on the income earned in New Zealand. When it comes to the computation of the corporate tax, all companies will be treated the same which means applying the tax at a 28% rate. This rate is flat.
It should be noted that same tax rate is applied to branch offices of foreign companies operating in New Zealand
Below, our team lists the NZ corporate tax rate according to business type:
- Resident companies and branches: 28%
- Trusts and trustees: 0% on the initial amounts in the trust and 33% on any income earned by the trust;
- Māori authorities: 17.5%;
- Non-profit organizations registered according to the Incorporated Societies Act 1908: 28%;
- Self-employed individuals: the tax rate for individuals;
Unincorporated companies: the tax rate for individuals.
For the purpose of taxation in case of self-employed individuals, our company formation experts list the main taxes applicable to individuals:
- 10.5% for income between 0-14,000 NZD;
- 17.5% for income between 14,001-48,000 NZD;
- 30% when the income is between 48,001 and 70,000 NZD;
- 33% for income between 70,001 and 180,000 NZD and 39% for any income higher than this amount.
It should be noted that the 39% rate applied for the income year 2021-2021 and future income years. For the purpose of taxation as a self-employed individual, a person is considered a resident in New Zealand for tax purposes if he/she has a permanent place of residence in the country or has been in New Zealand for more than 183 days in a given 12-month period. As seen from the values presented by our experts for 2021, in some cases the individual income tax is higher than the NZ corporate tax rate. This can be an issue to keep in mind for those who are considering opening a sole trader as opposed to a private limited liability company or another business form.
In order to be considered tax residents, New Zealand companies must first obtain tax identification numbers, known as IRDs, by registering with the authorities. The Inland Revenue in New Zealand handles this procedure.
What are the requirements for corporate tax returns in New Zealand?
Companies are required to file tax returns so that the New Zealand corporate tax rate
can be levied on their income. In order to do that, a New Zealand company
is required to file tax returns which establish the amount of money which will be taxed. The company representatives are required to file annual tax returns which indicate the income earned by the business during the financial year.
The corporate tax returns must be filed according to the following calendar:
- the fiscal year ends on March 31st for the previous year in which the income was generated;
- the tax returns must be filed by July 7th for the balance sheets registered between October 1st and March 31st;
- for the period of April 1st and September 30th, the tax returns must be filed by the 7th day of the fourth month;
- the tax must be paid based on the period for which the corporate tax returns were filed;
- it is possible for New Zealand companies to appoint an agent to file their tax returns.
Penalties apply for the late filings in connection to the NZ corporate tax rate as well as the GST filings and other tax-related requirements. Some acts related to tax filings and tax liability, such as taking an unacceptable tax position or gross carelessness when it comes to these requirements can he subject to shortfall penalties, calculated as a percentage of a tax shortfall resulting from the taxpayer’s behavior. In some cases, criminal liabilities for tax filings are also applicable when an individual is found guilty of the so called “knowledge offenses” by aiding and abetting, tax evasion or obstruction offenses.
Our company registration specialists in New Zealand
can offer more information about the corporate tax
and can help business owners register their companies with the Inland Revenue. Discussing with our agents can help business owners in New Zealand avoid unnecessary penalties.
What are other taxes for companies in New Zealand?
The New Zealand corporate tax rate is not the only one to take into account, there are also other business taxes. Among these the Goods and Services Tax (GST) which is the equivalent of the value added tax in European countries.
Companies are imposed with the GST on the services and products they sell in New Zealand. The standard rate of the GST in New Zealand is 15%, however, certain types of goods and services offered by companies are zero-rated. Companies are required to register for GST purposes when the annual value of their supplies exceeds 60,000 NZD. Businesses, are also permitted to make a voluntary registration even if they do not meet this threshold.
As far as the GST filing and payment requirements are concerned, companies need to file monthly, bimonthly or twice a year returns, according to the annual value of their supplies. In most cases, the returns are filed and paid before the 28th day of the month following the one for which the calculation is made. There are certain situations in which the GST returns are to be filed quarterly, as opposed to the other periods that may be possible; such as situation is when a GST entity is registered as a non-resident supplier (under the applicable remote service rules).
Another important aspect apart from the NZ corporate tax rate is the taxation of dividends paid by a company. In New Zealand, shareholders are imposed with the dividend tax, however, the authorities here provide for tax exemptions for such payments to the extent of the corporate tax paid by the company.
Examples of the applicable withholding taxes for different types of payments are listed below:
Dividend payments: subject to a 0% or a 33% rate in case of residents and 0%, 15% or 30% in case of non-residents;
Interest: rates of 28%, 33% or 45% apply for resident companies and 0% or 15% rates for non-resident companies;
Royalties: subject to a 0% rate in case of residents and a 15% rate for non-residents.
There are no fees for technical services and New Zealand does not impose any capital gains tax.
Employers in New Zealand are subject to the social security contributions, a certain percentage of the employee’s gross income that is paid to the KiwiSaver superannuation scheme. This is a voluntary savings scheme to which the employee and the employer make contributions and the Government
submits a member tax credit contribution.
A real property tax can be charged at a local level by the authorities. Its value is based on the official land valuation, hence the rates vary from one area to another. There is no transfer tax or stamp duty in NZ.
In addition to the taxes mentioned above, employers are required to pay a fringe benefits tax that applies on the value of these benefits (for example, motor vehicle or low-interest loans offered to the employees). The value of this tax increased as of 1 April 2021 to a minimum rate of 49.25% (while previously it has a 43% rate). Companies with employees may also be subject to other workforce-related payments, such as those for accident compensation premiums, the road tax or local property rates applied by the government.
Our local advisors can offer more information on the for a company
as well as more details on the New Zealand corporate tax rate
Accounting services in New Zealand
If you plan on opening a company in New Zealand, you should consider asking for support related to accounting matters. Our New Zealand company formation agents work with a team of accountants which can support with the financial matters of your company.
We can assist with the tax and GST registration procedures with the Inland Revenue and with the preparation and filing of the monthly, quarterly and annual tax returns and other financial documents. We can also assist with audit services where the law requires it.
Do not hesitate to contact us
for full information on the taxation of companies in New Zealand
. With a vast experience in offering company registration services in New Zealand
, our representatives can guide you in choosing the right type of structure for your local business.