Do you live offshore and are thinking of selling your residential property in NZ? The Residential Land Withholding Tax (RLWT) rules might apply to you.
These rules put an obligation on purchasers or their agents (usually lawyers) of properties sold by owners who are offshore to deduct tax from the sale proceeds. The application of the rules involves completion of a declaration. The intent of the rules is to ensure NZ IRD gets some tax money up front before it “disappears” overseas. It is then up to the vendor to claim back any overpaid tax from IRD.
What does RLWT apply to?
- Sale, gifting, compulsory acquisition, mortgagee sales or any other disposal or transfer of NZ residential property, including land and leasehold titles, by an offshore person
When does RLWT apply?
- Property purchased from 1st October 2015 to 28th March 2018 and sold within two years or
- Property purchased from 29th March 2018 forwards and sold within five years
- Purchase date ordinarily means the date of registration with Land Information NZ, but there are exceptions eg. for subdivisions and buying off the plans
- Sale date ordinarily means the date you entered into an agreement for sale
Who is classified as an offshore person?
- A NZ citizen who has not been in NZ at any time in the last three years
- A NZ resident who has not been in NZ at any time in the last 12 months
- A non-NZ citizen, or not entitled to reside in NZ permanently
- A company incorporated outside NZ
- A company, look-through-company, limited partnership, or Trust with more than 25% of the directors or shareholders or trustees classified individually as offshore persons
- Additional rules apply to Trusts with any offshore beneficiaries
How much RLWT is deducted?
The amount withheld is the lesser of:
- Sale price multiplied by 10% or
- Sale price less purchase price multiplied by 33% or
- Sale price less outstanding rates
Are there any exemptions?
RLWT does not apply to:
- Non-residential property
- Developers (must apply for a certificate of exemption)
- Property which meets the “main home exclusion” under the Bright-Line rules
- Property transfers from a deceased person to the executor of the estate
- Sale/disposal by an estate on the death of a person
- Sale/disposal of inherited property
- Property transfers due to settlement of relationship property
If you are selling a property and living offshore, please touch base with us prior to the sale so that we can work through whether or not these rules will apply to you.