WELLINGTON: New Zealand’s Inland Revenue has published the final version of its interpretation statement on tax residence (IS 14/01). Here, Marine Accounts’ Patrick Maflin dissects the various residency rules in order to determine an individual’s tax status.
The 183 Rule: you will be deemed a resident for tax purposes if you have spent more than 183 days in New Zealand in a 12-month period. An individual will then be considered tax resident from the first of the 183 days. It is important to note that once you are considered resident by this rule you remain resident until you fulfil the 325 rule.
The 325 Rule: the 183 rule will apply until you can demonstrate that you have been out of New Zealand for 325 days in any 12-month period and you do not have a permanent place of abode in New Zealand.
The 325 days do not have to be consecutive but they must be within the same 12-month period. Note that both the 183 and 325 day rules apply within “rolling” 365 day years, and not either fiscal or calendar years. Furthermore days of arrival and departure are counted as “resident” days.
Permanent Place of Abode: An individual will be considered resident under this rule if they have a permanent place of abode available to them in New Zealand. An abode can be a lasting or enduring place where they usually live.
It addition it can also be a place in which they can live or dwell when required, in locality with which they have a durable connection. This rule takes precedence over the 183 day rule so, in theory, travellers could be deemed to be resident well past the 183 days where a PPA exists.
The Permanent Place of Abode (PPA) rule requires some interpretation; to have a (PPA) in New Zealand it must be somewhere that you can live for example a house or other dwelling, and it must be available to you.
Individuals who return to their parents house after finishing work overseas can often be deemed resident as per this rule, more especially if they lived there before departing to work overseas. In the event this happens you will be considered resident for all of the years that you worked overseas.
