After the recent ruling against a former soldier caused New Zealand expatriates to be concerned about their potential to hold non-resident tax status the Inland Revenue Department (IRD) has finally released a update on the matter.
Whilst not all parts of the ruling have been covered tax authorities have now agreed that renting out a house owned in New Zealand by an expat won’t automatically make them a New Zealand taxpayer. Last year the Taxation Review Authority (TRA) appeared to widen the scope for tax residency with property ownership being taken to be a permanent place of abode.
Deloitte associate tax director Mike Williams said “After more than a year of uncertainty, heightened by the somewhat surprising decision from TRA, we finally have a basis on which to begin reconstructing the foundations for assessing an individual’s tax residence when they leave New Zealand.” When the TRA made its decision last year the fact that the IRD took the view that commercially rented dwelling houses constituted a permanent place of abode made many expatriates uncomfortable.
He continued “The acknowledgement from the Commissioner of Inland Revenue that long-term investment properties and holiday homes would not normally constitute a permanent place of abode, but need to be considered with all other circumstances, is reassuring.”
KPMG tax director Rebecca Armour has warned though that at the moment things are not formalized so expatriates should still be careful and make sure they receive proper advice about their non-resident tax status.
“The Inland Revenue’s position for any specific person must be predictable at the time decisions need to be made (about tax residency),” said Armour. “In this respect, the Inland Revenue operational guidance is unhelpful. No comfort has been provided that their previously approved positions will not be challenged.”