Taxation

Taxation in New Zealand

New Zealand has a relatively simple, low-cost tax system compared to other countries. 

The following information is intended as a guide only.  Professional advice should be sought prior to commitment to production, as the application of the tax rules will be facts specific and dependent on individual circumstances.  In addition, tax laws may change; the information contained in this guide is only as up to date as at the date of publication. 

Please contact Film New Zealand  to facilitate access to professional advice, or visit the screen production section of the Inland Revenue Department's website.

Summary of Key Taxes & Rates

Goods and Services Tax (GST)

• A business must register for GST if it is making, in aggregate, more than NZ$60,000 of supplies in New Zealand in any 12-month period. A business may voluntarily register for GST if it is under this threshold
• GST should be charged on the value of the supply (excluding financial services and domestic accommodation) and returned to the New Zealand Inland Revenue
• In most circumstances the rate of GST to be charged is 15% for supplies made on or after 1 October 2010.
• GST can be charged at 0% for goods and services exported
• All productions will incur GST on many New Zealand costs that can be claimed back when GST registered.

Corporate Tax Obligations

• The income tax rate is 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 (lower than that of Japan, United States and Canada)
• The income tax rate is reducing to 28% with effect from the 2012 income year (generally commencing from 1 April 2011 for most companies)
• Specific income tax rules apply to films which receive grants from New Zealand government agencies
• Double Taxation Agreements may provide relief in some circumstances
• As most NZ crews are self-employed and take care of their own taxes, there are no compulsory employment tax or fringe benefit tax obligations.  Withholding obligations may arise when engaging crew and are noted below
• Withholding tax will apply to all actors and performers
• Withholding tax will apply to technicians unless they have an exemption certificate
• Withholding tax may apply to non-resident crew
• Withholding tax may apply to payments to non-residents for the use of equipment
• Withholding tax obligations may vary if the crew are operating as a NZ company.

Personal Tax Obligations

• Progressive income tax rates apply to taxable income derived by resident and non-resident individuals
• Generally individuals are subject to tax on the basis of taxable income derived over the period from 1 April to 31 March
• Personal tax rates are being lowered with effect from 1 October 2010. The table below outlines the tax rates which apply before and after 1 October 2010

Taxable Income NZD	Tax Rate 2012/2013
0 - 14,000	10.5%
14,001 - 48,000	17.5%
48,001 - 70,000	30%
Over 70,000	33%

• Because personal tax rates are being lowered mid way through an income year, composite rates should be used when calculating tax payable for the period 1 April 2010 to 31 March 2011
• There are no tax free thresholds
• Double Tax Agreements (DTAs) may provide relief in some circumstances
• The withholding tax deducted by the production company for non resident actors and performers is usually a final tax.

Incentives To Film In New Zealand

Explicit Incentives

• The New Zealand government has specific incentives available for the film industry.  Large budget film grants (including large budget screen production grants and post-production, digital and visual effects grants) are exempt from income tax
• Correspondingly, no tax deductions are available for expenditure to the extent it is funded by a large budget film grant.

For more details on this incentive, please visit our Large Budget Screen Production Grant Scheme page.

Implicit Incentives

New Zealand government policy has created a further incentive through an open, deregulated economy.  This provides overseas investors with a stable, competitive, transparent, low cost business environment in which to invest for the long term.

There are a number of other financial benefits:

• It has been estimated that New Zealand production costs are 20% cheaper than Australia and 32% cheaper than Canada, after any tax incentives or rebate schemes in those territories are taken into account, and prior to the effect of New Zealand’s tax exemption for large budget film grants.  The flexible, deregulated and highly creative New Zealand production environment makes your dollar go further.
• The exchange rate effectively extends a project’s budget. One New Zealand dollar has the same purchasing power as one US dollar.  One New Zealand dollar is worth between USD$0.75 and USD$0.84. View today's exchange rate.

Taxation Principles

New Zealand has

• a broad-based tax regime, designed to be comprehensive with few exemptions and incentives
• no sales, regional or state taxes
• no explicit capital gains tax

New Zealand operates under a self-assessment tax regime, whereby taxpayers are responsible for calculating their own tax obligations, paying the tax to the Inland Revenue and filing their tax returns.  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 having technically incorrect tax positions).  It is critical that productions undertaken in New Zealand get their tax obligations correct to avoid unexpected additional costs.

Goods and Services Tax

GST is a value added tax levied on the supply of goods and services in New Zealand.  Financial services (primarily debt and equity instruments) and domestic accommodation are exempt from GST. 

In most circumstances the rate of GST to be charged is 15% for supplies made on or after 1 October 2010.

More information in respect of the change in rate of GST can be found on the Inland Revenue website.

GST is charged at 0% on the export of goods and services.

GST is intended to be a tax on the end user of goods and services.  Therefore businesses that incur GST in the course of making their taxable supplies can claim back that GST from the Inland Revenue.  All productions will incur GST on supplies received.  Productions will be required to register for GST in order to claim back this GST cost, thereby effectively neutralising the effect of GST on the cost of production.

Income Tax

New Zealand’s year for income tax purposes is 1 April to 31 March.  In certain circumstances approval may be obtained from the Inland Revenue to use a different balance date, such as to align with that used in a foreign jurisdiction.

Income tax is charged on the world-wide taxable income, net of allowable deductions, for entities and individuals tax resident in New Zealand (immigration residency is not relevant). 

Non-residents will be subject to income tax only on income sourced from New Zealand.

Individuals who qualify as 'transitional residents' will generally only be subject to tax on New Zealand sourced income.

These rules may be modified by Double Taxation Agreements (“DTA’s”) New Zealand has entered into.  New Zealand has DTA’s with most developed countries, including the USA, Canada, Australia, and the United Kingdom.

Corporate Tax Residency

A company is deemed to be tax resident in New Zealand if it is either:

• Incorporated in New Zealand, has its head office or centre of management in New Zealand, or
• Control of the company by its directors is exercised in New Zealand.

Individual Tax Residency

New Zealand treats individuals as being tax resident in New Zealand if they:

• Have a "permanent place of abode" in New Zealand, or
• They are physically present in New Zealand for 183 days or more in any 12 month period.

However, individuals who are also tax resident in countries which have a DTA with New Zealand may be treated as a non-resident for the purposes of the DTA. This could be the case, for example, if an individual maintains a permanent home and personal and economic ties in the country they are ordinarily tax resident.

Service Companies

Complexities can arise if services are provided through a service company (i.e. where individuals contract through associated companies).  For example, if that service company is deemed to have a permanent establishment in New Zealand (through the presence of employees in New Zealand for extended periods), the company could also be subject to New Zealand income tax and New Zealand GST.  If contemplating the use of a service company, tax advice should be sought in advance of entering into any contracts.

International Tax

Overseas operations in New Zealand may be subject to New Zealand’s comprehensive “transfer pricing” rules.  These rules require goods and services passing between cross-border related parties to be made at “arm’s length” prices. 

New Zealand also has certain debt to equity ratio requirements (“thin capitalisation”) that may restrict the interest deductions of overseas owned entities.

GST Compliance

Registration

Registration for GST is compulsory where the value of supplies made in New Zealand in the prior 12 month period exceeds $NZ60,000 or there are reasonable grounds for believing that it will exceed $NZ60,000 within the following 12 month period.  Registration is a simple process and can be completed on the Inland Revenue website.

Special rules apply to non-residents making supplies in New Zealand; we can provide a referral for advice if this situation applies.

Taxable Supplies Made

Any registered person must charge GST on taxable supplies made in New Zealand. In most circumstances the rate of GST to be charged is 15% for supplies made on or after 1 October 2010.

If goods or services produced within New Zealand (such as the image) are exported to an overseas client then GST may be "zero-rated" i.e. GST is 0%, provided certain requirements are met.

Taxable Supplies Received

GST will be charged by GST registered suppliers on all production costs incurred in New Zealand, except financial services and domestic accommodation.  Provided these production costs are incurred in making taxable supplies (either at 15% or 0%) the GST can be claimed back from the Inland Revenue.

A GST invoice referred to as a "Tax Invoice" is required to be held for any claims above NZ$50 (including GST).

Provided the production is effectively structured and registered, GST should not be a final cost to a production.

Accounting for GST

GST registered persons are required to account for the net GST paid and collected when filing GST returns.  The options for filing GST returns are monthly, bi-monthly or six monthly, calculated on an invoice (accruals), payments (cash) or hybrid (mixed accruals/cash) basis.  The GST return is to be filed with the Inland Revenue by the 28th of the month (or the next business day if this falls on a weekend or public holiday) following the end of the GST period, except for the periods ending:

• 30 November - the due date is 15 January; and
• 31 March - the due date is 7 May.

Film productions that export their goods or services usually elect to file their GST returns monthly, on an invoice basis in order to claim the GST cost on expenses regularly and improve cash flow.

Income Tax Compliance

Special Income Tax Rules For Films

Expenditure incurred in producing a film classified as a “New Zealand Film” by the New Zealand Film Commission  is generally fully deductible in the year in which the film is completed.

Expenditure incurred in producing or acquiring other films is generally deductible over two years commencing from the year in which the film is completed.

Additional rules also apply, such as where non-recourse loans or deferred payment arrangements exist. Professional advice should be sought where any film is subject to New Zealand income tax.

There are rules in New Zealand that may limit and defer the tax deductions available to film investors to the amount of money they have at risk.

Income Tax Returns

Other than certain employees, generally any person who is subject to income tax must file an income tax return with the Inland Revenue. These returns are due to be filed by 7 July of the year following the relevant tax year, although an extension of time is permitted for taxpayers with late balance dates, or represented by approved tax agents.

Income Tax Payments

Where sufficient tax is not withheld at source from a person’s income then a person is required to make equal interim tax payments (referred to as provisional tax) in the fifth, ninth and thirteenth month of the person’s tax year to cover their income tax liability. The amounts of these payments are either based on an uplift of the previous year’s liability or an estimate of the current year’s liability. A wash up payment is required by 7 February of the year following the relevant tax year, although this date will differ for early balance date taxpayers, and those represented by a tax agent.

Alternatively provisional tax may be calculated and paid under the GST Ratio Method. For more information relating to this method please refer to the Inland Revenue website.

Any overpayment of tax paid will be refunded when the tax return is filed.

Interest is charged or paid by the Inland Revenue on any under or overpayments of tax (currently 8.91% and 1.82% per annum respectively) at each of the provisional tax instalment dates, except for individuals whose total tax liability does not exceed NZ$50,000. Due to the high interest cost, most taxpayers endeavour to make their payments at each of the provisional tax dates as close as possible to one third to the amount of actual liability for the year.

Withholding Obligations

New Zealand Actors and Crews

Most actors in New Zealand operate as self-employed individuals, or through service companies.  As such the only withholding obligations are:

• 20% withhold from any payments to actors trading as individuals, unless they have a tax exemption certificate or they have not provided a tax code declaration in which case the applicable rate to withhold at is 35%;
• Some individuals may wish to have more than 20% withholding tax voluntarily deducted from their earnings;
• No withholding tax applies to companies.

Any overseas actors who are regarded as New Zealand tax resident (after the application of any DTA) will be treated as New Zealand actors for tax purposes.

Generally, all workers in the screen production industry who perform work behind the camera are treated as contractors rather than as entertainers and operate either as self-employed individuals, or through service companies. As such the only withholding obligations are:

•  20% withhold from any payments to technicians trading as individuals, unless they have a tax exemption certificate or they have not provided a tax code declaration in which case the applicable rate to withhold at is 35%;
• Some individuals may wish to have more than 20% withholding tax voluntarily deducted from their earnings; 
• No withholding tax applies to companies.

Any overseas crew who are regarded as New Zealand tax resident (after the application of any DTA) will be treated as New Zealand crew for tax purposes.

Overseas Actors and Crew

Overseas actors and performers are subject to

• 20% withholding tax on gross earnings from New Zealand (this includes payments such as royalties which you may receive after you have left 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 the New Zealand source of income is exempt from tax here under the relevant DTA, and they are in New Zealand for less than 92 days in any 12 month period, no withholding tax will apply;
• If they are here for between 92 days and 183 days in any 12 month period and their New Zealand-source of income is exempt from tax under the relevant DTA, they can apply to the Inland Revenue for an exemption from withholding tax, otherwise a withhold of 15% on payments is required;
• If payments for contract work amount to less than $15,000 in a 12-month period they will be exempt from withholding tax. Instead, contractors themselves will be responsible for paying any New Zealand tax owing at the end of the year.
• 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 apply, or if they have not provided a tax code declaration then the amount of withhold should be increased to 30%.

Withholding tax is not a final tax and a personal tax return will need to be filed with personal tax rates applying, less the withholding tax credit.

Lease Payments to Non-Residents

Any payments to non-residents for the use of equipment brought to New Zealand may be subject to a withholding tax.  You should seek professional advice if this situation applies.

Employees

If any person is an employee of the production company, there are obligations on the production company to withhold PAYE, and account for fringe benefits.  This situation would be unusual for production companies but is determined on a case by case basis; if this situation arises please seek advice. Further details on what constitutes an employment relationship are available from the Inland Revenue Department.

Accounting for Withholding Tax

These taxes are deducted from the amounts paid and must be remitted to the Inland Revenue (located online at www.ird.govt.nz) fortnightly or monthly.

Where there is an obligation to withhold, an approved declaration form is required to be obtained (excluding non-resident actors and performers); in absence of this a further 15% is required to be withheld e.g. if the withhold for crew is 15% and no declaration form is provided, 30% must be deducted.