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Where Taxpayers and Advisers Meet

New Zealand/UK DTA

Brightonian
Posts: 112
Joined: Wed Aug 06, 2008 3:31 pm

New Zealand/UK DTA

Postby Brightonian » Thu Feb 11, 2016 5:34 pm

I have been asked by a client (non-dom but resident in the UK for over 20 years) if the sale of his house in New Zealand will attract CGT in the UK. I have looked at the DTA. Article 14 states that 'income or gains derived by a resident of a contracting state from the alienation of immovable property . . . . situated in the other contracting state . . . . may be taxed in that other state'. This would suggest that the gain can only be taxed in NZ. But NZ does not have a capital gains tax! Does that mean that, if they don't tax it, the UK can. I suspect that little word 'may'. But I can't see a 'subject to tax' restriction. Does anyone know?

maths
Posts: 8003
Joined: Wed Aug 06, 2008 3:25 pm

Re: New Zealand/UK DTA

Postby maths » Thu Feb 11, 2016 6:21 pm

may be taxed in that other state'. This would suggest that the gain can only be taxed in NZ.
Incorrect.

The DTA allows NZ to tax any gain made on immovable property located in NZ even if owned by a UK resident. Their domestic law ultimately determines whether any liability actually arises.

The UK are not precluded from taxing the same gain although double tax credit relief will be available if necessary.

GlobalTaxAdviser
Posts: 633
Joined: Fri Dec 05, 2014 1:18 am

Re: New Zealand/UK DTA

Postby GlobalTaxAdviser » Thu Feb 11, 2016 6:26 pm

Hi

Under the New Zealand domestic laws highly likely on any immovable property that some form of tax would apply be it capital or income

The UK domestic laws stated that he shall be taxed on worldwide income

We will then need to look at the DTA

Therefore since his primary residence would probably be the UK under Article 4 of the treaty. We have look at Article 22 - double tax elimination to see if the credit for the NZ tax can be applied in the UK

Be careful of the different financial years, calculations methods and exchange rates

Kind Regards

GTA

Brightonian
Posts: 112
Joined: Wed Aug 06, 2008 3:31 pm

Re: New Zealand/UK DTA

Postby Brightonian » Fri Feb 12, 2016 5:44 pm

Thank you both. I do find the wording of DTA's difficult. The word 'may' is the problem, I think. So he is taxable in the UK with credit for any NZ tax levied. Again, thanks.

bd6759
Posts: 3306
Joined: Sat Feb 01, 2014 3:26 pm

Re: New Zealand/UK DTA

Postby bd6759 » Sat Feb 13, 2016 5:13 pm

They use the word "may" because the domestic legislation might not provide for any tax to be paid. It cannot say "will be taxed" because there might not be a taxing provision for that income or gain in that country. If there is no taxing provision, the income or gains will not be taxed. If there is a taxing provision, the income or gains will be taxed.


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