How Revenue Minister McClay will tax foreign property investors

The government is fleshing out the detail on its measures to tax more offshore property buyers.

Revenue Minister Todd McClay today released a discussion document outlining the resident land withholding tax (RLWT), aimed at foreign investors who buy and sell New Zealand property for capital gain.

Someone who buys a property for $610,000 and sells it for $820,000 within the two year “brightline” test should be liable for tax on the $210,000 capital gain.

Under the rules being proposed, the withholding tax is calculated as the lower of either 10% of the total value of the property sold, or 33% of the capital gain.

In this case, the choice is either $82,000 – being 10% of the value of the property being sold – or 33% of $210,000 – which, being $69,300, is the amount that would be withheld by the Inland Revenue.

Solicitors and conveyancers are to collect the tax on behalf of the IRD.

People whose sales make a loss will be able to claim a rebate, the revenue minister says.

Submissions close on October 2.

The changes are to take place from July 1 next year.

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