Just a quick reminder that the new land rules are in effect. These will tax the sale of a residential property within 2 years unless it was a personal residence, subject also to a few other exceptions.
The more problematic parts of this have been that:
1. All land owning trusts must be registered with the IRD and obtain an IRD number.
2. In the case of a trust that is an offshore person, the trust must have a bank account in New Zealand.
There have been some problems at a practical level obtaining both IRD numbers and opening bank accounts. There have been significant delays in these and consequentially it is important not to leave these to the last minute.
If you don’t comply with the new rules and provide IRD numbers or bank accounts, then land transfers cannot be registered. Also, they will effectively become self-policing for the IRD. Sales and purchases will basically be able to be electronically trawled to give the IRD lists of transactions to look at. The problem is that the banks may not actually want these clients as in excuse the IRD is simply forcing them to do its anti-money laundering checks.
The final step will be the withholding regime that will apply to offshore persons who dispose of properties within the two years. The proposed amount of withholding tax will be the lesser of:
1. 33% (or 28% in the case of a company) x (the difference between the sale price and the purchase price of the property); and
2. 10% of the purchase price;
3. The net land proceeds after secured creditors are repaid.
The purchaser will be required to hold these funds through their lawyer and to remit the money to the New Zealand Inland Revenue Department.