New Zealand also adopts a progressive tax regime, where residents are subject to taxes on their worldwide income. On the other hand, as far as a non-resident is concerned, they are only subject to income from sources in New Zealand.
Personal Income Tax Rates
The personal income tax rates in New Zealand are as follows:
- For an income between NZD (New Zealand Dollars) 0 to NZD 14,000: The tax applicable is NZD 1,470. The percentage on excess is 10.5%.
- For an income between NZD (New Zealand Dollars) 14,001 to NZD 48,000: The tax applicable is NZD 7,420. The percentage on excess is 17.5%.
- For an income between NZD (New Zealand Dollars) 48,001 to NZD 70,000: The tax applicable is NZD 14,020. The percentage on excess is 30%.
- For an income between NZD (New Zealand Dollars) 70,001 to NZD 14,000: The applicable percentage is 33%.
However, it must also be noted that the New Zealand government has implemented a new income tax rate of 39% on an income $180,000. This rate has been applied on 1st April 2021.
Other Personal Taxes in New Zealand
In addition to personal taxes in New Zealand, there are several other taxes that are also levied on the residents in New Zealand. Examples of these personal taxes are given below:
- Employer Superannuation Contribution Tax (ESCT): Employer contributions towards a pre-approved superannuation fund are supposed to be levied under ESCT. This was formerly referred to as specified superannuation contribution withholding tax.
- Fringe Benefits Tax: Fringe benefits tax is supposed to be payable by employers in cases where a fringe benefit is extended towards an employee, arising from the relationship between the employer and the employee. Employers are supposed to bear a Fringe Benefit Tax (FBT) at a rate of either 43% or 49.25% of the taxable value of fringe benefits that are extended in the first three quarters of the year.
- Consumption Taxes: There is also a consumption tax, also referred to as GST (a value-added tax), that applies to most goods and services. It is applied to most categories of goods and services, with a certain exemptions. The rate that is applied to taxable supplies is either 15% or 0%. The zero-rate is applicable on exports, as well as financial services.
- Luxury and Excise Taxes: Luxury and Excise Duties are applicable (in addition to GST) on non-necessity products, like beverages, tobacco, as well as certain fuels (like compressed natural gas). The excise duty are however levied from situation to situation.
Corporate Income Taxes in New Zealand
The Corporate Income Tax rate in New Zealand is 28%. New Zealand resident companies are taxed on their worldwide income. On the other hand, as far as non-resident companies are concerned, they are taxed on the income that is sourced from New Zealand only.
Other Corporate Taxation in New Zealand
In addition to a fairly simple calculation of Corporate Income Taxes in New Zealand, there are a couple of other taxes that need to be paid by companies. These taxes include the following:
- Good and Services Tax (GST): This is a tax on consumption. Even though the burden of the tax falls on the end consumer in most cases, yet it can be seen that this tax needs to be properly declared by the company in order to ensure that there it is properly collected at source.
- Customs Duties: Custom Duties that is levied on imported goods ranges from a rate of 1% to 10%, depending on the commodity, and the relevant law.
- Excise Duty: Excise Duty is also levied in New Zealand, primarily on goods and services that are classified as non-necessity items.
- Transfer Taxes: There are no transfer taxes applicable in New Zealand.
- Stamp Duty: There is no stamp duty applicable in New Zealand.
- Employer Superannuation Contribution Tax (ESCT): Employer’s contributions towards a pre-approved superannuation fund is also considered to be an important element from perspective of corporations. In this regard, there are several different tax slabs that are applicable. The tax rates on ESCT is as follows:
- Salary (or wages) in addition to superannuation contributions up to NZD 16,000: An ESCT rate of 10.5% would apply.
- Salary (or wages) in addition to superannuation contributions from NZD 16,001 to NZD 57,600: An ESCT rate of 17.5% would apply.
- Salary (or wages) in addition to superannuation contributions from NZD 57,601 to NZD 84,000: An ESCT rate of 30% would apply.
- Salary (or wages) in addition to superannuation contributions over NZD 84,000: An ESCT rate of 33% would apply.
Tax Credits for Corporates in New Zealand
New Zealand also boasts a higher rate of tax credits and incentives than any other country in the same region. Some of the tax credit regimes are as follows:
- Foreign Tax Credits: In the case where a New Zealand resident company earns income from a foreign source, the company is allowed a credit equivalent to the foreign income tax that is paid on that income. However, the credit is generally the lower of actual tax paid overseas on the income.
- Investment Activities (in-bound): This tax incentive is mainly offered to attract investment into New Zealand.
- Research and Development Tax Incentives: In the Fiscal Year 2020, there are research and development tax credits that are offered up to 15%. However, Research and Development activities should fall under the same criteria, in order to be eligible for the tax incentive.