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Thread: HELP - Gift Tax

  1. #1
    Join Date
    May 2006
    Location
    Suffolk, UK
    Posts
    27

    Default HELP - Gift Tax

    Hello Group,

    I am organising my move from UK to Christchurch in October 2006, my visa runs out November 2006. I was just about coping with sorting out the move, until being landed in the middle of a huge family crisis which started a week or so ago.

    To sort out the crisis, looks like I will have to transfer a large amount of cash to other family member(s).

    I am very concerned if I will be subject to gift tax on the transfer, although the transfer will be made before I move to New Zealand. If this is the case, I will not be able to move to Christchurch. Here are the facts on the transfer:

    o My permanent home is currently in UK
    o Transfer will be made before I move to Christchurch, after which my permanent home will be in New Zealand
    o I currently have no home or monies in New Zealand
    o Transfer will be from moneys held in Isle of Mann to UK
    o I expect I will be classed as having an "enduring relationship" with New Zealand and subject to the double taxation agreement for current tax year.

    As far as I understand, I will not have to pay gift tax as I will not have a permanent home in New Zealand until after the transfer, my permanent home for the transfer is in UK, and all monies are outside New Zealand. I have read through the gift tax guide on New Zealand Inland Revenue site, it is not totally clear in this situation.

    Any advice would be greatly appreciated, but please be clear if you have made any assumptions, or not totally sure about anything.

    Any recomendations for a good tax advisor to help me sort through this would also be appreciated.

    Regards,
    Paul.

  2. #2
    Join Date
    Aug 2004
    Location
    Auckland,Herts,Somerset
    Posts
    225

    Default

    Paul,

    How many days will you have been in NZ before taking up residence here? If the transfer of funds takes place before you arrive here permanently (and you have not already attained "tax residence", which will depend on the numbers of days you have been physically present in NZ before coming here permnanetly), this should happen at a time before you are NZ resident and therefore not subject to NZ gift tax. It should also be potentially exempt transfer for UK inheritance tax purposes (so no tax to pay unless you die within 7 years of making the gift).

  3. #3
    Join Date
    May 2006
    Location
    Suffolk, UK
    Posts
    27

    Default

    Hi,

    I really appreciate your help on this matter,

    Quote Originally Posted by Wannaway
    Paul, How many days will you have been in NZ before taking up residence here?
    None, I will arrive in October 2006 and it will be my first day in New Zealand, at least for this tax year. The last time I was in New Zealand was back in 1996 on Holiday for about 7 weeks. The transfer will be made before I arrive in New Zealand.

    Quote Originally Posted by Wannaway
    you have not already attained "tax residence", which will depend on the numbers of days you have been physically present in NZ before coming here permnanetly
    I am concerned about the test for "Enduring Relationship with New Zealand" in guide ir292. Looks like this was introduced in 2004, and details are very sketchy in the guide. It appears that if I pass this test, it will override the 183 day rule, and my tax residency will start from beginning of the current tax year. I'm not sure if I have misread that, but it is very complicated.

    Please feel free to pm me if you would prefer.

    Regards,
    Paul

  4. #4
    Join Date
    Aug 2004
    Location
    Auckland,Herts,Somerset
    Posts
    225

    Default

    Based on your replies, you won't be tax resident until you arrive in New Zealand in October, you are then likely to be tax resident from that day onwards if you stay for any reasonable length of time (generally more than 6 months).

    You should not meet the "enduring relationship" test until, at the very earliest, you arrive in NZ but in reality this is likely to be sometime after that. This test (which has been around for years, the reference to 2004 in the IRD guide is the 2004 Tax Act, the legislation that contains all NZ income tax law) really looks at people who have substantial interests and, well, ties to NZ, ie you have a house that you own for personal residence (or long term rental), all your "vital interests" are in NZ (financial interests, social interests etc). If you have only previously been in NZ for a holiday in the last ten years, there is no way the IRD could assert that you have an "enduring relationship" with NZ. This is only likely to happen if you arrive in NZ and are still here in, say, a couple of years time and you have shifted all, or substantially all, your economic, domestic, social and cultural interests to NZ.

    Given all this, and the fact that your gift will be done and dusted before you come to NZ, there will be no gift tax for you to worry about in NZ.

  5. #5
    Join Date
    May 2006
    Location
    Suffolk, UK
    Posts
    27

    Default

    Hi,

    Thankyou very much for your help and advice, it is very much appreciated.

    I hope to get back on track with my upcoming move to Christchurch soon.

    Regards,
    Paul.

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