The New Zealand government has launched a consultation on its plan to impose withholding taxes on residential land sales by overseas owners.
The tax, to be introduced in mid-2016, is intended to act as a guarantee that offshore property speculators pay capital gains tax (CGT), said revenue minister Todd McClay. It will act as a ‘bond or prepayment of any tax that may be due’, he said.
It is closely linked to another measure, announced some weeks ago, under which gains from residential property sold within two years of purchase will be liable to CGT, unless the property is the seller’s main home, inherited from a deceased estate or transferred as part of a relationship property settlement. This so-called ‘bright line bill’ (meaning that it imposes a clear distinction between taxable and non-taxable disposals) is also under consultation. It will apply whether the seller is inside or outside New Zealand, and includes an anti-avoidance rule to prevent companies or trusts being used to circumvent the ‘bright-line’ test.
However, the Internal Revenue Department considers that it is not necessary to enforce a withholding tax on NZ residents, because it should be possible to collect CGT from them later.