Residential Withholding Tax on offshore persons - could it affect you?

From 1st July 2016 - a new tax relating to residential property will be in force.  This tax (the Residential Land Withholding Tax RLWT) applies to 'overseas investors'.  BUT it is important to note the definition of 'overseas in this legislation - IT COULD APPLY TO YOUR ENTITY.

From 1st July - any entity that has an overseas connection will be subject to this RLWT if they sell residential property within two years of acquisition.  This tax has been designed and developed to try and slow down the accelerating property prices in New Zealand.  But because of the definitions, if your entity has an 'overseas connection' it could be caught and be liable for tax.  This tax is payable at the marginal tax rate of the entity.

Chapman Tripp have outlined their understanding of what an overseas person is on their Brief Counsel.  We have copied it below for you (for more information - please check out their website).

Offshore RLWT person

The definition of “offshore RLWT person” is wider than the definition of “offshore person” in the Overseas Investment Act and under the recently enacted property tax statements regime.  Even where the owner of a property appears to be in New Zealand, it will be necessary for conveyancing agents to ask their clients detailed questions about their factual circumstances to determine whether RLWT applies.  

An individual will be an “offshore RLWT person” if he or she:

• is a New Zealand citizen who has not been in New Zealand within the last three years
• holds a residence class visa and has not been in New Zealand within the last 12 months, or
• is not a New Zealand citizen and does not hold a residence class visa.

A company or partnership will be an “offshore RLWT person” if:

• it is incorporated or registered outside New Zealand or constituted under foreign law
• it is controlled (directly or indirectly) by more than 25% offshore RLWT persons, or
• more than 25% of its directors or general partners are offshore RLWT persons.

Many New Zealand companies will be caught by these rules.  For example, a New Zealand company with three directors, one of whom is Australian, could mean  Read more here.

Dodging your tax is a dangerous game.

Like many people in business, I find Provisional Tax and GST to be one of the more stressful aspects of life.  Fortunately - after 17 years !!! I managed to create a system that eliminates the stress and makes my life a lot more pleasant.  One of the problems with tax is that the rules are continually changing and it can be difficult to keep up with the new rules.

For our clients, particularly complicated tax rules include Provisional Tax on non PAYE or RWT income, (if your tax liability is more than $2500 a year), Foreign Investment Fund/Fair Dividend Rate Tax (FIF/FDR) on overseas investments and taxation on Overseas superannuation that is brought back to New Zealand.

The power of the IRD to gather information about your situation is enormous and I know that there are other people like me - where putting aside money for taxes happens way before anything other expenditure is undertaken.

However, some people prefer to 'play the game' and challenge their tax liabilities and obligations.

Diana Clement has written an excellent article that highlights the following things (see link to the article below)

1. Tax evasion is a criminal offence and dodgers could end up with free board and lodging in prison.
2. The IRD can start investigations for all sorts of reasons. It may receive a tip-off. There's even a form, the IR873, for those who want to report tax evasion or fraud anonymously.
3. IRD can get access to bank accounts and credit card data held by Kiwis in 51 different countries.
4. Last year the IRD asked pension transfer companies for the details of up to 30,000 clients, says Baucher. It waited until the deadline to declare the transfers had passed. Anyone who hadn't made appropriate declarations was sent an audit letter.
5. Tradespeople, shop owners and others who do cash jobs sometimes get a nasty shock.
6. When it comes to tax, Kiwis are guilty until they prove their innocence.

The Clbuttic Mistake

I read this article in the Guardian and found it amusing. Here is some more information - as some light relief.

Fortunately - these days, the software is a little bit cleverer and there aren't as many instances - but it shows how technology can go wrong.

The Clbuttic Mistake: When obscenity filters go wrong [The Guardian]

President Abraham Lincoln was buttbuttinated by an armed buttailant after a life devoted to the reform of the US consbreastution.

Not an extract from an essay by a particularly poor history student, but a selection of the nonsense phrases created by automatic software designed to remove offensive words from articles posted on the internet. 

The phenomena, known as “The Clbuttic Mistake” after a mangling of the word “classic” that is believed to be the first identified instance of the problem, can be found on tens of thousands of websites.

The error is caused by poorly programmed anti-obscenity filters – similar to spell checkers – that automatically replace words considered rude or offensive with more acceptable variants. “Butt” replaces “ass”, “breast” is substituted for “tit”, and so on.

Rudimentary versions of this software do not just replace obscene words, but also alter longer words which contain banned letter combinations, so "assassination" becomes "buttbuttination", "passenger" becomes "pbuttenger", and "passerby" becomes "pbutterby".

The problem is fairly widespread; Google searches turn up 25,500 results for “clbuttic”, 984 for “consbreastution”, and 326 for “Buttociated Press”, a corruption of the US news agency the Associated Press.

Perhaps the most celebrated instance of the Clbuttic Mistake comes in an article from an extinct website jucee.org.

It contains mentions of a “series of previously secret Central Intelligence Agency (CIA) plots to buttbuttinate foreign leaders”, a law “pbutted by Congress”, and new powers "butterted" by the US administration.

Another article is titled “What did the British Embbutty do for this British National Overseas pbuttport holder.”

The error appears particularly common on foreign sites hosting English-language articles, but a similar mistake on an American Christian news website caused international amusement.

The American Family Association had programmed its filter to replace the word “gay” with “homosexual”, causing an article about sprinter Tyson Gay’s triumph at the US Olympic trials to begin: “Tyson Homosexual was a blur in blue, sprinting 100 meters faster than anyone ever has."

Further on in the piece the runner was referred to as “the 25-year-old Homosexual”

On the many websites and message boards devoted to identifying new instances of the Clbuttic Mistake, the greatest source of confusion appears to be the choice of banned words, and particularly whether “ass” is really more offensive than “butt”.