New Zealand

Interest limitation for residential investment properties 

The government recently enacted tax rules to disallow interest deductions in relation to residential investment properties (with deductions for interest on existing loans to be phased out over time). These rules are intended to address New Zealand’s 'long-standing housing affordability problem' and bring about more owner-occupied housing, sustainable house prices, and a more competitive housing market.

The rules apply only to properties that someone can live in as a dwelling. The excluded properties are generally those that are unsuitable for use as long-term accommodation, such as business premises, certain Māori land, emergency, transitional, social, and Council housing, commercial accommodation, care facilities, farmland, retirement villages and rest homes, employee accommodation, student accommodation, and land outside New Zealand. Also, to facilitate the supply of new housing, 'new builds' are exempt from the rules.

In addition, the rules do not apply to companies whose core business does not involve residential land. This is determined by reference to a formula where residential property (including new builds) makes up less than half of their total assets. However, close companies (i.e. companies where five or fewer individuals or trustees own more than 50% of the company) are subject to the rules. 

Under the rules, tax deductibility depends on the use of the money, not the collateral against which the debt is registered. Where taxpayers have both residential property and any other business assets, a 'stacking' approach means taxpayers are able to allocate loans first to assets that are not residential investment properties based on the market value of assets at 26 March 2021.

The government has also enacted specific anti-avoidance rules in relation to these changes.

The rules apply from 1 October 2021.

Cryptoassets: Goods and services tax (GST) and financial arrangements

The Taxation (Annual Rates for 2021-22, GST, and Remedial Matters) Act 2022 enacted a range of GST changes concerning cryptoassets, including a definition of ‘cryptoasset’ for GST purposes. These changes confirmed that cryptoassets are not subject to GST, whereas non-fungible tokens (NFTs) are covered by the standard GST and remote services rules. As such, cryptoassets are not subject to GST when they are bought or sold; however, they do have GST implications when they are received as payment for normal business activities. Further, cryptoassets are generally not subject to the financial arrangements rules for income tax.

GST on costs incurred in relation to capital-raising through issuing cryptocurrency with features that are similar to debt, equity, or participatory securities will be recoverable through the expansion of a specific deduction rule.

Services related to cryptoassets that are not in themselves supplies of cryptoassets, such as mining, providing cryptoasset exchange services, or providing advice, continue to be subject to the existing tax rules. The new definition and rules apply retrospectively from 1 January 2009, when the first cryptoasset (Bitcoin) was launched.

GST documentation and record-keeping rules (changes to tax invoice requirements)

The Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 enacted changes to GST invoicing requirements to align with modern business recordkeeping practices, e-invoicing initiatives, and electronic recordkeeping. The main changes are in manner and form, with the nature of information intended to remain largely unchanged (i.e. invoices compliant under the old ’tax invoice‘ requirements should remain compliant with the new rules). The overall aim is flexibility for GST-registered businesses to create and retain information in their business recordkeeping systems.

The current concept of a ’tax invoice‘ will be removed and replaced with more general concepts, such as 'supply information' and 'taxable supply information'. Further, it is also intended that the process for credit and debit adjustments will become more flexible. This would allow for errors to be corrected without issuing credit and debit notes.

Other specific amendments support this shift in requirements, including:

• Increasing the low-value threshold where taxable supply information is not required from 50 to 200 New Zealand dollars (NZD).
• Copies of taxable supply information requested by a recipient are no longer required to be marked as 'copy only'.
• Buyer-created tax invoices (BCTIs) are no longer required to have Inland Revenue pre-approval. However, other requirements remain, including requiring an agreement to exist between the supplier and recipient (who must both be GST registered) stating that only the 'buyer' will create the taxable supply information and will provide that information to the 'seller', and the reasons for entering into this agreement.
• A group of registered persons (a 'supplier group') can use the shared invoice process if none of those entities are part of a GST group. A nominated entity may issue tax invoices as agent on behalf of the other entities that comprise the supplier group.

Double tax agreements (DTAs)

New Zealand is currently negotiating new and updating DTAs with Austria, Belgium, Fiji, Korea, Luxembourg, the Netherlands, Norway, Portugal, Saudi Arabia, the Slovak Republic, and the United Kingdom.