Withholding tax planned for overseas sellers
Overseas-based sellers will have to pay a residential land withholding tax if they sell a property within two years, according to a newly-released Government paper.
Tuesday, September 1st 2015, 11:55AM
by Miriam Bell
Revenue Minister Todd McClay said the proposed tax, which will only apply to offshore sellers, is an important part of the Government’s residential property tax compliance work.
It will help ensure that tax is paid under the bright-line test legislation, which was introduced into Parliament last week.
Both pieces of legislation are intended to target people who are seeking to make a quick gain from property, whether they are based in New Zealand or overseas.
McClay said it can be more difficult to collect tax from people speculating on property in New Zealand if that seller lives overseas.
“For this reason we are proposing that a portion of the sales proceeds are withheld at the time of sale and paid to Inland Revenue as a pre-payment or bond against any tax that may be due.”
According to the Residential Land Withholding Tax consultation paper*, the proposed tax will only apply when a) the seller is based offshore, b) the property being sold is residential land, and c) the property is sold within two years.
The paper suggests that:
• The tax should be withheld at a rate that is the lower of a) 33% x seller’s gain (the standard rate) or b) 10% x total purchase price (the default rate).
• The tax should be withheld and paid to the IRD by the conveyancing agent involved in the sale, which will usually be the conveyancer or lawyer used by either the buyer or the seller.
• If the sale results in a loss to the seller, the tax will not need to be paid.
• If there is a failure to pay the tax, the sale of the property will not be held up but monetary penalties will apply.
McClay said the Government wants everybody buying and selling property for profit to know that all due taxes are expected to be paid.
“Together with the other measures announced in Budget 2015, the proposed withholding tax should go a long way towards bolstering our property tax rules and improving tax compliance amongst property speculators.”
The Government’s proposed set of tax measures came in response to ongoing public concerns about the state of the Auckland housing market and the involvement of overseas buyers in it.
Public consultation on the Government’s proposal began this week and submissions close on 2 October 2015.
*A summary of the paper can be read here and Q&As on the paper can be read here.
| « RBNZ policy tweak “gamechanger” for Auckland’s supply woes | Free Investment Property Showcase Events: Auckland, Wellington and Christchurch » |
Special Offers
Comments from our readers
No comments yet
Sign In to add your comment
|
|
Printable version |
|
Email to a friend |
