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Residential Land Withholding Tax (RWLT)

August 24, 2016

Recently a few new tax rules about sale of residential property in New Zealand were introduced by the Inland Revenue Department (IRD). First is the bright-line test, which is introduced in November 2015. It requires income tax to be paid on any gains from the sale of residential property bought and sold within two years, with some exception. For example, if the property sold was the vendor’s main home. It applies to property acquired after 1 October 2015.

More recently, the IRD introduced a new withholding tax – residential land withholding tax (RWLT). RWLT is primarily intended to support the “bright-line test”. It applies to offshore RWLT persons when they sale their residential properties in New Zealand within two year of acquisition and the sale amount is paid or payable after 1 July 2016.

Residential land withholding tax (RLWT) applies when:

  • the property being sold is residential property in New Zealand
  • the property was bought on or after 1 October 2015 and was sold within two years, and
  • the vendor is an “offshore RLWT person”

Offshore RLWT person can be individual, company, trust, partnership, club and society. Here is the link to the definition of “offshore RLWT person” from the IRD website.

From 1 July 2016, any person or entity selling New Zealand residential property within two years of purchase need to complete a residential land withholding tax declaration form (IR1101), if the purchase date was on or after 1 October 2015. Here is the link of the form IR1101 from the IRD website

Normally the seller’s conveyancer is the withholder of RLWT and required to deduct and pay the amount of RLWT on behalf of the seller.

Residential land withholding tax won’t be deducted if the residential property sold is inherited property or the vendor holds a valid certificate of exemption.

The vendor can apply for a certificate of exemption if the residential property sold is their main home in New Zealand or they carry on a business of developing land, or dividing land into lots or erecting buildings in New Zealand. The vendor needs to complete residential land withholding (RLWT) exemption form (IR1103). Here is the link of the form IR1103 from the IRD website:

If you require further information about residential land withholding tax, please contact JingJing Pan.

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