New Zealand is a sovereign island country in the southwestern Pacific Ocean. The country geographically comprises two main landmasses—the North Island and the South Island—and around 600 smaller islands.
Because of its remoteness, it was one of the last lands to be settled by humans.
New Zealand is developed country, which ranks highly in international comparisons of national performance, such as quality of life, health, education, protection of civil liberties, and economic freedom.
The country underwent major economic changes during the 1980s, which transformed it from a protectionist to a liberalized free-trade economy. The service sector dominates the national economy, followed by the industrial sector, and agriculture. International tourism is a significant source of revenue.
New Zealand is a member of the United Nations, Commonwealth of Nations, ANZUS, Organisation for Economic Co-operation and Development, ASEAN Plus Six, Asia-Pacific Economic Cooperation, the Pacific Community and the Pacific Islands Forum.
Ease of doing business in New Zealand
New Zealand is ranked 1st among 190 economies in the ease of doing business, according to the latest edition of the World Bank Group’s Doing Business 2019: Training for reform report. New Zealand has taken the top spot in the World Bank’s annual ease of doing business ranking for the third year in a row.
business, according to the latest edition of the World Bank Group’s Doing Business 2019: Training for reform report.
*New Zealand’s performance in the latest Doing Business report.
The report found that Georgia and New Zealand have the lowest number of procedures required to start a business. New Zealand also holds the shortest time to start a business (0.5 days), while Slovenia has the lowest cost (0.0).
But while New Zealand ranks number one for starting a business, it ranks 21st for enforcing contracts.
New Zealand was praised for improving the simplification of preregistration and registration formalities, including inspection and other requirements.
New Zealand was also lauded for having all relevant legislation for building regulations found on an official government website.
However, while the World Bank’s report is encouraging for New Zealand, Infometrics‘ latest forecast says there could be disappointing economic growth in New Zealand in the next two years, despite the latest GDP figures showing the fastest rise in two years.
New Zealand Payroll– Basic Facts
The official currency is the New Zealand dollar (NZD) and New Zealand does not consider digital currencies to be legal tender.
Payroll consists of the general deductions for taxes, but there are also extenuating circumstances for things like student loans and Kiwisaver deductions.
All employers must register as an employer, withhold income taxes from employees, and remit income taxes withheld under New Zealand’s Pay as You Earn (PAYE) system, administered by the Inland Revenue Department (IRD). The form required to do this is an IR334 – which can be found on the IRD website.
Certain companies will also need to register for GST (Goods and Services Tax). It is not mandatory to make payments to employees or the authorities from an in-country bank account.
New Zealand tax residents generally are taxed on their worldwide income while nonresidents generally are only taxed on their New Zealand-sourced income.
You are considered a tax resident of New Zealand, if you reside in New Zealand for 183 days in any 12-month period or have an “enduring relationship” with New Zealand. Former tax residents are still considered tax residents until they have been out of New Zealand for 325 days in any 12-month period and have stopped having an enduring relationship with New Zealand.
The New Zealand tax year runs from April 1st to March 31st.
Tax and Social Security Considerations
The Corporate Tax Rate in New Zealand stands at 28%
Individual Income Tax
New Zealand has progressive or gradual tax rates. The rates increase as your income increases.
Income tax rates for 2019
If you have more than one source of income you pay secondary tax. The amount of secondary tax you pay depends on the secondary tax code you give your employer or payer.
Implementation of Payday Filing: From April 1st, 2019, New Zealand requires employers to report to the Inland Revenue Department data regarding payments to employees and taxes deducted from the payments when the payments are made. The deadline to complete payday filing generally is 2 working days after the date the payment was made. However, the due date for employers that are not required to file the data electronically to the Inland Revenue Department is 7 working days after the date the payment was made.
The Sales Tax Rate (GST) in New Zealand stands at 15%.
- Dividends – Dividends paid by resident companies from profits already taxed at the corporate level may carry imputation credits for the tax period. Dividends are referred as “fully imputed”, “partially imputed”, or “unimputed”, depending on the extend of which the company has chosen to use its imputation credits. Dividends paid to a nonresident are subject to a 30% nonresident withholding tax (NRWT) to the extend they are not fully imputed. Fully imputed dividends are subject to a 0% NRWT rate where the nonresident has a 10% or more voting interest in the company. In most other cases, the NRWT rate will be 15%.
- Interest – Interest paid to a nonresident is a subject to a 15% NRWT, which may be subject to further reduction under an applicable tax treaty.
- Royalties – 15%
- Branch remittance tax – No
- Technical service fees – No, unless such services fall within the definition of royalties.
- Other – Payments made to a nonresident for services that have been physically performed in New Zealand, or for the use of personal property in New Zealand, are subject to the 15% nonresident contractors’ tax (NRCT), withheld at source (subject to exemptions). Payments of management fees to an associated company offshore often will attract an NRCT liability if offshore staff are physically performing management services in New Zealand.
Social security and health: Covered by general tax, though many people have private health insurance.
ACC (New Zealand’s unique accident compensation scheme): Earners pay 1.39% up to a maximum of NZD 126,286 in earnings (2018/201919 tax year). Motorists pay a levy with their annual car registration. Employers pay insurance cover based on industry risk.
KiwiSaver is voluntary, work-based saving scheme. The Kiwisaver rate in New Zealand stands at 11%.
The minimum employee contribution rate is 3% of gross pay (an employee also may contribute at prescribed percentages). The compulsory employer contribution rate is 3% of an employee’s gross pay. The government also will contribute a “member tax credit” in relation to an employee member’s contribution over an annual period at a rate of NZD 0.50 for each NZD 1 contributed by the member, up to maximum limit of NZD 521.43.
- Payroll tax – No
- Real property tax – Local authorities charge rates on land based on the official valuation of the land. The rates vary considerably from one locality to another.
- Employer Superannuation Contribution Tax (ESCT) – Employers must withhold ESCT from their portion of all superannuation contributions, including KiwiSaver contributions. If based on personal income, it should be calculated at the applicable income tax rate. Otherwise, employers should withhold between 10.5 and 33 percent of their superannuation contributions, depending on the employee’s wages plus the employer’s gross contributions for the previous year, or the estimated wages and contributions for the current year.
- Fringe Benefits Tax (FBT) – FBT, which is payable by employers, is a tax on benefits that employees receive as a result of their employment, including those benefits provided through someone other than an employer. The single rate is 49.25% of all fringe benefits provided. This rate covers employees with annual income of at least NZD 70,000.
Compensation and Benefits
Minimum wage: New Zealand currently has one of the highest minimum wages in the world, and further increases have been forecast into 2021.
As of 1 April 2019, the mandatory minimum wages are as follows:
- Adult Minimum Wage – $17.70 per hour
This is the wage most commonly used by businesses in New Zealand and applies to all employees over 16 years of age.
- Starting-Out Minimum Wage – $14.16 per hour
This applies to employees aged 16-19 entering the workforce for the first time. However, there are certain requirements to use this wage rate.
- Training Minimum Wage – $14.16 per hour
This applies to employees 20 years or over who involved in relevant industry training to become qualified. However, there are certain requirements to use this wage rate.
Wage payment: Employers are required to pay employees on the day and at the interval agreed between the two parties. Issuing payslips in New Zealand is not mandatory.
Hours of work: The maximum workweek is 40 hours 5 days a week.
Overtime: New Zealand generally does not require employers to pay overtime pay unless specified in an agreement. However, work on public holidays must be paid at time and a half.
Holidays: There are 10 public holidays and 14 regional anniversary days in New Zealand. See the full list with holidays in New Zealand in 2019.
- Paid leave: Full-time employees are entitled to 4 weeks of paid annual leave each year.
- Sick leave: 5 days of paid sick leave for employees after their first 6 months of continuous payment, and additional 5 days of paid sick leave after every subsequent 12 month period of employment.
- Bereavement leave: After 6 months of employment, employers must grant all employees with 3 days of paid bereavement leave in the case of the death of an employee’s spouse or partner, parent, child, sibling, grandparent, or grandchild.
- Paid parental leave: Employees are entitled to a parental leave period of 22 weeks for births or adoptions. From 1st of July 2020, employees will be entitled to a parental leave period of 26 weeks for births or adoptions. The paid parental leave provision is paid for by the IRD to one parent at a time and may be transferred between parents.
- Workplace injury leave: 1-week paid leave, paying employees at least 80% of their normal wages during this period.
- Domestic violence leave: Employees who are victims of domestic violence can claim up to 10 days of paid domestic violence leave in a 12-month period.
Bonuses and special benefits: New Zealand does not mandate employers to provide bonus payments to employees.
Termination of employment: There is no mandatory notice period. Employers must provide employees with a written statement of the reasons for dismissal if requested, and must submit the statement within 14 days of receiving a request. Employers must pay employees for any unused leave provisions accrued after an employment relationship is terminated.
Workers’ compensation: Employers must contribute to the Accident Compensation Company, which provides employers and employees coverage for workplace accidents and is covered under social taxes.
Record keeping: Employers generally must keep employee records for 6 years. Tax records generally must be kept for a minimum of 7 years.
Foreign workers in New Zealand
Visas: Employers must ensure that their foreign workers have the proper visas to work in New Zealand—either a work to residence visa, work visa, a resident visa, or a variation of one of these visas. In the case that employees do not qualify for one of these visas, employers may obtain permission to recruit other foreign workers from Immigration New Zealand (INZ). Learn more about the different type of visas here.
Taxes: Foreign workers should pay the same tax as the New Zealand citizens, unless they are on a qualifying short-term visit or qualify for the transitional residence exemption on foreign sourced income.
Foreign workers who are not liable for income taxes during their visit, if the following terms apply:
- the total number of days in New Zealand in a 12-month period is 92 days or less
- the foreign worker is employed by an employer that is not a resident of New Zealand
- the income earned while in New Zealand is taxed in the foreign worker’s country of residence
New Zealand residents in the US: Foreign workers from New Zealand must meet general visa requirements and be certified to be employed in the US.
New Zealand is eligible for the following:
- Visa waiver program for business visitors – allows New Zealand citizens to travel to the US for 90 days or less for business-specific purposes without having to obtain a B-1 business visa. Stays longer than 90 days will require a visa. Individuals may return to the US under the visa waiver program if a “reasonable length of time” has passed.
- H-2 B visas – cover labor or services of a temporary or seasonal nature in occupations other than agriculture or registered nursing. The number of H-2B visas issued each year is limited by US law.
New Zealand has entered more than 40 income tax treaties and 19 tax information exchange agreements. The country has signed an income tax treaty with the United States, however, does not have a totalization agreement with the United States for social tax coverage purposes. Learn more here.
The New Zealand government actively encourages foreign investment and the country has world class infrastructure to support multinational business. New Zealand offers investors a highly skilled workforce and a politically and economically stable environment. However, there are specific rules for payroll and taxation which international companies should consider when setting up operations in New Zealand.
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- Wikipedia – “New Zealand”
- The World Bank Group’s Doing Business 2019: Training for reform report
- Doing Business 2019 report: New Zealand
- Trading Economics – Ease of Doing Business in New Zealand
- NewsHub – Zane Small – “World Bank ranks New Zealand best place to do business”
- Trading Economics – New Zealand Corporate Tax Rate
- KPMG’s corporate tax table
- Inland Revenue – Tax rates for individuals
- Trading Economics – New Zealand Sales Tax Rate – GST
- Deloitte- International Tax – New Zealand Highlights 2019
- New Zealand immigration – Taxes
- Trading Economics – New Zealand KiwiSaver Rate
- ACC (New Zealand’s unique accident compensation scheme)
- Employsure – New Zealand’s New Minimum Wage Explained
- New Zealand Government – Public holidays and anniversary dates
- Inland Revenue – Tax treaties
- New Zealand Immigration