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LAWCOMM 403 long notes.docx
LAWCOMM_403_long_notes.docx
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LAWCOMM 403 long notes.docx-CONTENTS Tips ...........
LAWCOMM_403_long_notes.docx-CONTENTS Tips ......................................................................................................................................................................................... 4 Introducon ............................................................................................................................................................................
LAWCOMM 403 long notes.docx-CONTENT...
LAWCOMM_403_long_notes.docx-CONTENTS Tips ......................................................................................................................................................................................... 4 Introducon ............................................................................................................................................................................
Page 47
Tax treaes come into effect when specified by the Governor-General by Order in Council (
secon BH 1(3)
)
Tax treaes override domesc law (
secon BH 1(4)
)
CHART FOR CALCULATING INCOME TAX LIABILITY
Page 48
JURISDICTION
OVERVIEW
New Zealand’s tax system is based on the twin jurisdiconal pillars of residence and source
– you are obliged to pay
New Zealand income tax if:
o
You are resident in New Zealand
Persons who are
resident
in New Zealand are obliged to pay New Zealand tax on their
worldwide
income, meaning both (1) income derived from New Zealand and also (2) income derived from
outside New Zealand
o
Your income has a New Zealand source
Income derived from New Zealand (that is, income having a New Zealand
source
) is taxable here,
whether the person by whom it is derived is resident here or not
Where in the Income Tax Act is this provided for?
o
Secon BB 1
(imposion of income tax)
“Income tax is imposed on taxable income…and is payable to the Crown
....
”
o
Secon BC 2
(annual gross income)
“A person’s annual gross income for a tax year is the total of their assessable income that is allocated
to the corresponding income year.”
Secon 29 of the Interpretaon Act provides that a person includes a corporaon sole, a body
corporate and an unincorporated body
o
Secon BD 1
(income and assessable income)
“An amount is income of a person if it is their income under a provision in Part C (Income).”
Income is assessable income unless it is (
secon BD 1(5)
):
Exempt income
(exempt for policy reasons)
, such as:
Dividends within wholly-owned groups (
secon CW 10
) (e.g. parent company A
owns subsidiary B; B makes a profit and pays a dividend to A – there is no tax here
because A will eventually pay a dividend to the ulmate shareholders, so the tax
should be imposed at that point)
Income of crew of vising pleasure craſt (
secon CW 21
) (e.g. foreigners sail their
boats to New Zealand and pay wages to the non-resident crew while in New Zealand
– therefore, the wages have a New Zealand source, but they are exempt because of
significant compliance burdens for a trivial amount of wages and to incenvize the
rich people to spend money in New Zealand)
Scholarships (
secon CW 36
)
Excluded income
(excluded for reasons related to the operaon of the tax)
, such as:
GST (
secon CX 1
) – the assessable income or deducble expenses excludes any GST
amounts received or paid (e.g. if the goods are $4, plus GST would make it $4.60;
but the assessable income is $4, and $0.60 is excluded as we exclude the GST)
Fringe benefits (
secons CX 2 to CX 38
) – fringe benefit tax is calculated so that the
burden of the tax is the same as if the value of the benefit was added to the
employee’s salary (but it is excluded because some fringe benefits are caught under
the ordinary meaning of ‘income’, so there might be double tax since it is also
subject to FBT; therefore, it is excluded from income tax)
Non-residents’ foreign-sourced income
This is essenally the same rule as the twin jurisdiconal pillars rule
But is this a sensible way to define the geographical scope of the tax system? – it is a
very wide category as most of the income in the world comes under this category,
so the old rule (the twin jurisdiconal pillars) seems to be simpler
Subpart YD sets out the basic rules on residence and source
o
Secon YD 1 sets out the rules for determining whether or not a natural person is resident in New Zealand
o
Secon YD 2 sets out the rules for determining whether or not a company is resident in New Zealand
o
Secon YD 4 sets out the source rules – that is, the rules for determining whether or not income has a New
Zealand source
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