An IRD number is required which is obtained on application from the IRD and thereafter reporting is either as a resident or a non-resident. Non-residents are only taxed on New Zealand sourced income whereas residents (which the RRV Policy requires an applicant to be) is taxed on worldwide income.
New Zealand has an international tax regime which briefly means that a New Zealand tax resident is obligated to declare their worldwide income and to pay tax in New Zealand at New Zealand tax rates on that worldwide income.
Generally while tax at New Zealand rates will be assessed in New Zealand a credit is given for any tax paid overseas either in terms of a double tax agreement if it exists or under New Zealand’s foreign tax credit regime.
Income under New Zealand law has a wide definition and it includes not only income received from employment such as salaries or wages, but it would also include (and this is not definitive):
- Allowances additional to salaries or wages; wherever earned;
- Interest on bank deposits or monies similarly invested or lent; wherever received;
- Rent from properties; wherever located;
- Profits accruing on investment funds may be included under a regime called The Foreign Investment Fund Regime;
- Company income (whether distributed or not) must be included if the taxpayer holds more than 40% of the shares in the company under a regime called The Controlled Foreign Companies Regime.
A New Zealand tax resident is required to assess what tax he will have to pay within a tax year and he must pay this as to one third on 7 July, one third on 7 November and one third on 7 March. The tax year is 1 April to 31 March and tax returns must be filed by 7 July for the preceding tax year.
The New Zealand tax system is reporter based, ie: the IRD receives a tax return and in reliance on the correctness of the returns, it will issue an assessment. However, it undertakes spot audits and one should assume that immigrants are likely to be a particular target. If as a result of such audit, it is found that income has been understated substantial penalties can be imposed – penalties can be fines and in some instances, jail.
The IRD could check the public record in any country to establish ownership of properties, company’s businesses etc.