Taxation

Question 1

What does YD 1 (2) of the Income Act refer to?

Answer 1

YD 1 (2) refers to the permeant place of abode test

Question 2

What is the permeant place of abode test?

Answer 2

YD 1 (2) permeant place of abode test is used to determine if a natural person is a New Zealand tax resident. A natural person is a New Zealand resident if they have a permanent place of abode in New Zealand, even if they also have a permanent place of abode elsewhere.

Question 3

What does YD 1 (3) of the income Act refer to?

Answer 3

Yd 1 (3) of the New Zealand income Act 2007 refers to the 183 day rule test, which means a natural person is a New Zealand resident if they are personally present in New Zealand for more than 183 days in total in a 12-month period.

Question 4

What year is the New Zealand income Act?

Answer 4

2007

Question 5

What does YD 1 (5) of the NZ income Act refer to?

Answer 5

YD 1 (5) refers to the 325 day rule.

Question 6

What is the 325 day rule?

Answer 6

A natural person treated as a New Zealand resident only under subsection (3) stops being a New Zealand resident if they are personally absent from New Zealand for more than 325 days in total in a 12-month period.

Question 7

What is the 183 day rule?

Answer 7

Means a natural person is a New Zealand resident if they are personally present in New Zealand for more than 183 days in total in a 12-month period.

Question 8

What does YD 1 (7) of the NZ income Act refer to?

Answer 8

A natural person who is personally absent from New Zealand in the service, in any capacity, of the New Zealand Government is treated as a New Zealand resident during the absence.

Question 9

Does YD 1 (7) apply to non resident natural persons that takes up a position for a government department based outside of New Zealand whilst outside of New Zealand

Answer 9

No. If non tax resident who lives outside of NZ they are exempt from YD 1 (7)

Question 10

What are the four tests of residences for Companies?

Answer 10

A company is a New Zealand resident for the purposes of this Act if—

(a) it is incorporated in New Zealand:
(b) its head office is in New Zealand:
(c) its centre of management is in New Zealand:
(d) its directors, in their capacity as directors, exercise control of the company in New Zealand, even if the directors’ decision-making also occurs outside New Zealand.

Question 11

What section of the income act is the incorporation test?

Answer 11

sYD 2 (1) (a)

Question 12

What does section YD 2 (1) (a) of the income Act 2007 refer to?

Answer 12

sYD 2(1) (a) refers to the incorporated in New Zealand test. If a company is incorporated in New Zealand it is automatically a NZ tax resident.

Question 13

What section of the income act is the Head Office test?

Answer 13

sYD 2 (1) (b)

Question 14

What does section YD 2 (1) (b) of the income Act 2007 refer to?

Answer 14

sYD 2 (1) (b) refers to the head office test. Which stipulates that a company is a tax resident if its head office is in located in New Zealand. The test places importance of a physical place where admin and management of business is conducted.

Question 15

What are some relevant factors in determining if a head office is in New Zealand?

Answer 15

Location of senior management
Where major strategic & policy decisions are made
Whether staff consider the office to be the head office

Question 16

What section is the centre of management test?

Answer 16

sYD 2(1)(c)

Question 17

What does sYD 2 (1)(c) of the income Act 2007 refer to?

Answer 17

sYD 2 (1) (c) refers to the centre of management test. Provides that a company is resident for the purposes of tax if its centre of management is in New Zealand

Question 18

What are some relevant factors in determining if a the centre of management is in New Zealand?

Answer 18

• Focus is on the management of the company as a whole not part of the companies operation.
• Defacto test meaning location is matter of fact.

Question 19

What is sYD2 (1)(d) of the income Act 2007?

Answer 19

The director control test

Question 20

What is the director control test?

Answer 20

A company is a New Zealand resident if its directors in their capacity as directors exercise control of the company in New Zealand

Question 21

What section of the income act 2007 is the directors control test?

Answer 21

sYD2 (1)(d)

Question 22

What is importance of control in the directors control test?

Answer 22

Control must be the majority control. Therefore if there are 5 directors who share control equally and only 2 are in New Zealand the control is not in New Zealand.

Question 23

Can directors be natural persons and companies for the directors control test?

Answer 23

Yes

Question 24

Can the residence of a company change?

Answer 24

Yes- if a company is not incorporated in New Zealand then a change in a qualifying factor may result in the company losing its residence status.

Question 25

What is company imputation?

Answer 25

A system that allows companies to pass on to their shareholders the benefit of the New Zealand income tax they have already paid.

Question 26

Are non NZ resident companies through the test and DTA allowed to establish an imputation account?

Answer 26

No

Question 27

What are the rules for grouping of losses between companies?

Answer 27

The company must be incorporated in New Zealand or carry on business through a fixed establishment in NZ.
Can not be treated as not being a tax resident in NZ under a DTA
Must not be liable for income tax in another country

Question 28

What is the primary objective of a DTA?

Answer 28

Decide which country has the primary taxing right & reduce double taxation.