Doing business in New Zealand - Grant Thornton

Annual tax return and assessment
New Zealand operates a self-assessment
regime whereby taxpayers file an annual
tax return and self assess the tax liability
for the year. In preparing the return, the
taxpayer calculates the amount of any
tax payment outstanding (see terminal
tax below) after credits in respect of
taxes deducted at source, provisional
tax and foreign taxes paid. The taxpayer
also calculates any provisional tax
obligations in the subsequent tax year.
The filing date for a company’s tax
return is 7 July following balance date
for taxpayers with balance dates from
1 October to 31 March. Taxpayers
with balance dates from 1 April to 30
September must file returns by the 7th
day of the 4th month following balance
date. For example, a 30 June balance
date taxpayer must file its return by the
following 7 October. In all cases, this
may be extended to 31 March following
the normal due date where the taxpayer
has an automatic extension of time by
virtue of being on the Inland Revenue
agency listing with a recognised tax
agent (such as a Chartered Accountant).
Tax payment obligations and timing
Taxes deducted at source
In general, there are five broad
categories of income that are taxed at
source:
1 Non-resident passive income, being
dividends, interest and royalties
derived from New Zealand by nonresidents
and that are subject to nonresident
withholding tax (NRWT)
2 Resident passive income, being
dividends and interest that is derived
by residents and subject to resident
withholding tax (RWT)
3 Income from employment (salaries,
wages and taxable allowances) that is
subject to ‘pay as you earn’ (PAYE)
deductions
4 Income from the performance of
various specified personal services,
including sales commissions,
directors fees, entertainment fees and
labour only contracts, that is subject
to withholding tax
5 Income from work undertaken in
New Zealand by non-residents
that is subject to non-resident
contractor’s tax (NRCT)
The obligation to deduct is imposed on
the payer who must account to Inland
Revenue for the tax deducted.
Terminal tax
Annual tax liabilities in excess of
provisional tax paid and taxes deducted
at source (PAYE, RWT, NRCT and
other withholding taxes) give rise to
terminal tax obligations.
The due date for payment of terminal
tax is dependent on the taxpayer’s
balance date and whether they file
their own returns or use a tax agent
(eg, external accountant) who has an
extension of time arrangement with
Inland Revenue.
For taxpayers with the standard
balance date of 31 March, terminal tax is
due by:
• 7 February of the following calendar
year, if the taxpayer is not linked
to a tax agent or does not have an
extension of time
• 7 April of the following calendar
year, if the taxpayer is linked to a tax
agent and has an extension of time to
file the relevant tax return.
Provisional tax
Provisional tax is not a separate
tax but a way of paying income tax
progressively as the income is received
through the year. Generally, three
instalments of provisional tax are paid
(two during the year and the final
instalment shortly after year end), based
either on an uplift of the prior year tax
liability or a forecast of the current year
tax liability. The amount of provisional
tax paid is then deducted from the final
tax liability for the year as determined
in the tax return. Provisional tax is
payable if the prior year tax liability
exceeds $2,500.
Where provisional tax is underpaid
or overpaid having regard to the actual
tax liability for the year, taxpayers are
generally exposed to use of money
interest (UOMI) payable either to or
by Inland Revenue. UOMI is calculated
based on the under or overpayment
at each provisional tax due date and
accrues until the balance is either
paid or refunded. The present rates of
UOMI are 1.75% on overpayments
and 8.4% on underpayments. UOMI is
generally assessable or deductible.
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