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New Zealand taxes and other payments

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Taxes and other payments in New Zealand

New Zealand GST/VAT and income tax

Will I pay tax if I work in New Zealand?

If you spend more than 183 days in New Zealand in a single year, you will be considered a resident and therefore required to pay tax for that year. However, if you are a new migrant, or a returning New Zealand citizen, you can apply for a temporary tax exemption, at which point (for tax purposes) you will become a transitional tax resident. To qualify for this exemption there are some strict requirements, but once granted it will allow tax exemption from income earned outside of New Zealand for up to 4 years. Any income earned within New Zealand during that time must be declared, however, and paid tax on. As an example, a state pension from another country can be effectively tax exempt for a total of 49 months.

Collection at the source, but…

The income tax rate for employees working in New Zealand is not affected by any deductibles whatsoever, and is usually collected at source from employers through the pay-as-you-earn (PAYE) system. There are, however, some tax credit allowances for certain situations such as childcare, donations and independent earners. The bottom rate of income tax is just 10.5% based on earnings up to $14,000 New Zealand dollars. The top rate of tax is 33%, which is payable by those who earn over $70,000 per year.

The local GST: New Zealand’s equivalent of VAT

In the 1980s New Zealand introduced a Goods and Services tax, which businesses and individuals must pay on products and services purchased in the country. The rate for most products and services is 15%. However, items that are exported to certain countries are not subjected to GST due to double taxation agreements with those countries. Financial services such as life insurance and banking are also not applicable to GST.