Income tax

Your company's liability for income tax in New Zealand depends on:

• your situation, and
• whether you have a permanent establishment, or
• whether you are a resident in New Zealand.

Find out more about tax residency and status.

Conducting business through an agent

If your agent is ...	and you ...	then ...
an independent reseller	are only conducting business activities in New Zealand through your independent reseller, and have no permanent establishment in New Zealand, and are a non-resident of New Zealand.	you are unlikely to have any income tax requirements, and your independent reseller will be responsible for any New Zealand income tax requirements.
a commission agent or employee	have a permanent establishment or are a resident in New Zealand	you will most likely be liable for income and employer taxes.

Filing your income tax return

If you have a permanent establishment or are a resident company, you will need to:

• apply for a New Zealand IRD number - do this by completing an IRD number application - non-individual (IR596) form
• file an income tax return to account for all income derived in New Zealand.

To find out what type of return you should file please see business income tax.

Provisional tax

If your residual income tax ("tax to pay" figure) is more than NZ$2,500, you may have to pay provisional tax for the following year. Residual income tax (RIT) is the amount of tax you have to pay less any tax credits you may be entitled to (excluding other tax payments made during the year).
If in your first year of business you expect your RIT to be NZ$2,500 or more then you can make voluntary payments throughout the year. This will reduce any interest you may be charged.
There are two options for working out your provisional tax during the income tax year: standard and estimation method.
Find out more about provisional tax or read the Provisional tax (IR289) booklet.

Tax payments when starting out in business

If ...	then ...	but ...
you are an individual starting up your business	you don't have to pay provisional tax in your first year of business	you must still pay income tax which becomes due before or shortly after your second year in business.
your RIT for your first year of business is over $2,500	you may also be paying: provisional tax for your second year of business, and income tax for your first year of business.

This combination of tax payments can have a big impact on your cash flow so we provide a discount on voluntary payments (made during your first year of business) as an incentive.

If you receive either self employed or partnership business income, you are entitled to a 6.7% discount against your end-of-year tax liability for each dollar paid voluntarily during the first year when the income was earned. The discount is calculated at a rate of:

• 6.7% of the amount you paid during the year or,
• 105% of your end-of-year residual income tax liability, whichever is the lesser.

To qualify, you have to:

• be either self-employed or a partner in a partnership
• derive assessable (gross) income predominantly from a business (not being interest, dividends, royalties, rents or beneficiary income)
• not be required to pay provisional tax in the income year, or have had to for the prior four years
• make a voluntary payment of income tax before the end of the income year
• elect to receive the discount within the timeframe for filing a return of income for that income year
• have never received an early payment discount unless it comes within the four-year rule

 

Date published: 24 Sep 2008

Back to top