Taxation in New Zealand

New Zealand has a relatively simple, low-cost tax system with no regional or state taxes. For comprehensive information on taxation in New Zealand, producers should seek advice from a New Zealand tax professional.

For ease of administration and compliance and Goods and Services Tax (GST) reasons it is generally more convenient to work through a local production company or to set up one up yourself (this is a relatively simple process).

Payments to overseas suppliers for goods and services must have withholding tax deducted so it is administratively simpler to use local suppliers where possible.

The information below is a general guide prepared by Film Auckland in November 2003. For more information either contact a tax professional or visit the New Zealand Inland Revenue Department website at www.ird.govt.nz

Taxation Principles

• New Zealand has:
• a broad-based tax regime, designed to be comprehensive with few exemptions and incentives
• sales taxes do not apply but a Goods and Services Tax (GST) of 15% is levied on most transactions. New Zealand businesses can generally recover the GST they have been charged
• regional or state taxes exist only in the form of property taxes (rates)
• no explicit capital gains tax.

New Zealand operates under a self-assessment tax regime. Taxpayers are obliged to calculate their own tax, filing their tax returns and paying any outstanding tax to the Inland Revenue Department (IRD). The self-assessment regime is buttressed by audit activity and a stringent penalties regime (including penalties for late payment of tax, not taking sufficient care and taking incorrect tax positions). Productions undertaken in New Zealand must ensure they understand their tax obligations from the outset to avoid unexpected additional costs.

Summary of key taxes and rates

• Goods and Services Tax (GST)
• All productions will incur GST on New Zealand costs but if the production company is GST registered it can be claimed back. All businesses in New Zealand whose annual turnover exceeds NZ$40,000 are required to register for GST. Special rules apply to non New Zealand residents.
• GST is levied at 15% on the value of the goods or services supplied within New Zealand (excluding financial services, domestic accommodation and most privately sold used goods)
• GST is levied on all but very small imports.
• GST is rated at 0% for exported goods and services provided certain requirements are met.
• Goods and services purchased from non residents without a fixed place of business in New Zealand are generally not subject to GST but in some circumstances withholding taxes must be deducted.

GST is added to invoices by businesses (unless the goods or services are exported and can be zero rated) and GST is paid on supplier invoices. The business furnishes a regular GST return to the IRD, remitting or claiming back the difference between the GST collected and the GST paid.

Overseas production companies intending to operate in New Zealand should generally utilise a New Zealand production services company or set up their own New Zealand production company. This should allow them to recover the GST they pay on their New Zealand production costs.

GST will be rising to 15% on 1st October 2010. A fact sheet on the GST rise from our sponsor Pieter Holl & Associates can be downloaded here

• Company Tax Obligations
• The income tax rate is a flat 30% of world-wide taxable income, net of allowable deductions, for companies tax resident in New Zealand, or if non-resident where income is sourced from New Zealand.
• Double Taxation Agreements (DTA) may provide relief in some circumstances.
• Withholding tax and fringe benefit tax generally doesn't apply to self employed New Zealand crew who contract through companies or hold certificates of exemption.
• Withholding tax will apply to all actors and performers.
• Withholding tax may apply to non-resident crew.
• Withholding tax will generally apply to payments to non-residents for the use of equipment (aside from small personal tools), in New Zealand.
• Per diems may or may not be subject to withholding tax depending on the amounts and circumstances. Your tax advisor can clarify this for you.

• Personal Tax Obligations
• New Zealand tax residents are taxed on their world-wide income.
• Non New Zealand tax residents are taxed on all income sourced from New Zealand.
• The maximum income tax rate for individuals is 39%. This rate applies to taxable income over NZ$60,000. Progressive tax rates (19.5% to 33%) apply for taxable income under this amount. There are no tax free thresholds.
• DTAs may provide relief to non-residents in some circumstances.
• The withholding tax deducted by the production company for non resident actors and performers is usually a final tax.

Withholding Obligations

New Zealand Actors and Crew
Most film crew in New Zealand operate as self-employed individuals, or through service companies. Individuals are not required to join a union.

• As such the withholding tax obligations for local actors and crew are:
• 20% withholding tax from any payments to actors and crew trading as individuals, unless they have a certificate of exemption;
• withholding tax does not apply to payments made to New Zealand resident companies
• if individuals wish to voluntarily increase the withholding tax deducted from their earnings they should apply for a special tax rate certificate from the IRD.

Any overseas actors or crew who are regarded as New Zealand tax resident (after the application of any DTA) will be taxed on the same basis as New Zealand actors and crew.

Overseas Actors and Crew

• Overseas actors and performers are subject to:
• 20% withholding tax on gross earnings from New Zealand, regardless of the time they spend in New Zealand and whether payments are made to them, a service company or agents (there are no exceptions to this rule);
• generally, this is a final tax in New Zealand.
• The application of withholding tax to overseas crew is as follows:
• if their income is exempt from tax in New Zealand under the relevant DTA, and they are in New Zealand for less than 92 days in any 12 month period, or the total payments made in any 12 month period are below NZ$15,000, no withholding tax will apply;
• if they are here between 92 days and 183 days in any 12 month period and their New Zealand income is exempt from tax under the relevant DTA, they can apply to the Inland Revenue for a certificate of exemption, otherwise a withholding tax of 15% on payments will apply;
• if the person is not covered by a DTA, or the period in New Zealand exceeds 183 days in any 12 month period, withholding tax of 15% will usually apply. In these circumstances, the withholding tax is not a final tax and a New Zealand tax return will need to be filed. Generally, a credit will be given in the New Zealand tax return for any withholding tax deducted.
  

Other withholding taxes

Withholding taxes may also apply to royalties (including equipment rentals) and interest paid to overseas parties. The withholding tax rate varies according to the type of payment and the relevant DTA.

Insurance premiums paid to non resident insurance companies are also subject to an effective 3.3% withholding tax.

Employees

If any person is an employee of the production company, a withholding tax known as Pay As You Earn (PAYE) will apply and it will also be necessary to account for fringe benefit tax on any fringe benefits provided.

Accounting for Withholding Tax

Withholding taxes and PAYE deducted from the amounts paid must be remitted to the IRD fortnightly or monthly, depending on the circumstances.

Where there is an obligation to deduct withholding tax, and no declaration form is provided, a withholding tax rate of 30% will generally apply to payments made to non-residents. In the case of a non resident from a country with which New Zealand has a DTA this rate may be reduced by furnishing approved declaration forms and following other administrative procedures. Depending on the circumstances this can reduce the rate to 15% or 10%. Double Tax Agreements exist with a number of countries including Australia, USA, UK, Canada, France, Germany, India, Malaysia, Japan.