Abstract:
The New Zealand Government had been facing increasing criticism for its failure to address the imbalance in the housing market. In particular the Government was criticised for the consequent inability to provide New Zealanders affordable housing, especially in Auckland. The media had often pointed the finger at the increasing number of residential properties being sold to non-residents. Equally, there has been considerable speculating in land and this has been seen as a further cause of the economic distortion in the residential property market. The National Party, and in particular then Prime Minister John Key, had continually denied there was any problem with the New Zealand housing market. Then in 2015 there was a massive policy reversal with one of the stated purposes being to ensure non-residents are paying their "fair share" of tax. On 17 May 2015 the Government delivered a significant taxation reform package as part of Budget 2015, containing four interrelated measures. While the new measures affect all vendors and purchasers, they are particularly aimed at "offshore persons". It is the taxation of offshore persons that is the core of this article. Specifically, the article considers the international tax implications of the new "bright line" measures in this regard. This includes a discussion of the sharing of information with other countries, nonresidents purchasing residential property in New Zealand pursuant to New Zealand's network of double tax agreements (DTAs) and tax information exchange agreements (TIEAs). Importantly, it considers New Zealand's taxing rights in relation to the capital proceeds from the sale of residential land under the relevant distributive articles in its DTAs. Finally, it suggests that the focus of the new measures on offshore persons may breach non-discrimination articles in some of New Zealand's DTAs.
