Residential Land Withholding Tax
Starting 1 July 2016 residential land withholding tax (RLWT) will need to be deducted from some residential property sales.
RLWT applies to all sales of residential land where:
a) the land was purchased after 1 October 2015; and
b) the land is sold within 2 years; and
c) the sale occurs after 1 July 2016; and
d) the vendor is an “offshore person”.
The definition of an “offshore person” is far wider than what most people may consider to be an offshore person. It includes:
a) A NZ citizen who has been out of NZ for 3 or more years.
b) Persons holding residence class Visas who have been out of NZ for 12 months or more.
c) A trust if:
i) more than 25% of the trustees or persons with power of appointment are “offshore persons”, or
ii) all natural person beneficiaries are “offshore persons”, or
iii) an “offshore” beneficiary has received a distribution from the trust at any time in the 4 years prior to sale of the land, or
iv) the trust has sold other residential land within the previous 4 years and at least one beneficiary is an “offshore person”.
d) A company or other entity if:
i) it is incorporated or registered outside NZ, or
ii) it is a partner in a limited partnership and more than 25% of the general partners are “offshore persons”, or
iii) more than 25% of the shares or decision making rights are held directly or indirectly by “offshore persons”.
Amount of RLWT payable?
It is the lessor of
a) 33% (28% if owned by a company) of the vendor’s profit.
b) 10% of the gross sale price.
The vendors lawyer or conveyancing agent must withhold and pay the RLWT to IRD.
The amount withhold is not a final tax and the vendor can file a tax return to claim back any tax overpaid.
Author: Peter Forrest