Hon Louise Upston

Minister for Land Information

10 May 2016

Overseas tax residents behind 2-3% of property transfers

Initial data generated from the Government’s property tax measures in Budget 2015 indicates overseas tax resident buyers are behind 2-3 per cent of New Zealand property transfers, Land Information Minister Louise Upston says.

Over the six months to 31 March, 97,800 property transfers of all types were registered with LINZ. Of these:

• 1692 (1.7 per cent) were transfers where at least one of the buyers involved declared an overseas tax residency.

• 1695 transfers involved non-resident sellers, so there was no net change in the tax residency of property owners.

• 38,061 (38.9 per cent) were transfers where buyers provided only a New Zealand tax residency.

• 27,333 (27.9 per cent) were transfers where buyers were exempt from the reporting requirements – primarily because they were buying their main home.

• The remaining 30,714 (31.4 per cent) of transfers were exempt because a contract existed before 1 October, but was settled after that date.

The Government introduced several measures on 1 October last year to bolster tax rules for property transactions.

They included requiring all non-residents and New Zealanders buying and selling any property (not just residential) other than their main home to provide a New Zealand IRD number as part of the usual land transfer process with Land Information New Zealand.

In addition, all those with overseas tax residency must provide their tax identification number from their home country, along with current identification requirements such as a passport.

“As a result of information gathered from these steps, LINZ has today issued the first batch of data covering the six months to 31 March,” Ms Upston says.

“While we can’t read too much into just two quarters, it indicates that overseas tax residents are behind a relatively small proportion of property transfers.

“The data for the first three months, in particular, was skewed by the number of transfers exempt because a contract existed before 1 October, but was settled after that date.

“Data for the three months ending 31 March is more useful, as fewer than 10 per cent of transfers were exempt for that reason.”

• Of the remaining transfers, buyers declared an overseas tax residency for just under 3 per cent of transfers in the March quarter.

• For 50 per cent of transfers, buyers provided only a New Zealand tax residency.

• The remaining 37 per cent were exempt from the reporting requirements because they involved buying a main home.

LINZ asked further questions of property buyers to determine whether properties had a home on it. Over the six months to March, buyers indicated that around 90 per cent of all transfers involved a property with a home on it.

After determining how many of these buyers were trust companies and businesses, LINZ concluded that around 3 per cent were non-resident buyers of residential property.

“It’s important to note this is not a register of foreign land buyers – and it was not designed as one,” Ms Upston says. “But over time, this information will allow us to monitor trends in the tax residency of property buyers.”

LINZ expects the next data - for the three months to 30 June - to be released in late July.

Weblink to LINZ reports: http://www.linz.govt.nz/property-tax-data

Property Transfers and Tax residency Executive Summary

Initial data gathered since property tax changes were introduced in October 2015 indicates that purchases by non-tax-residents amount to around 3 per cent of property transfers.

Since 1 October, LINZ has collected two types of data. The first relates to non-tax-resident purchases of New Zealand property. The second relates to purchasers’ citizenship and intention to live at the property. Both indicate that about 3 per cent of sales are to non-residents.

Tax residency

The first set of data is information on the tax residency of buyers and sellers of all property transfers in New Zealand. The purchasers fell in to one of three broad groups:

1. Buyers/sellers who were exempt from providing tax information because they were either purchasing their main home, entered into the contract before 1 October or fell within one of the other minor exemptions (Crown land transfers, Maori land transfers etc).

2. Buyers/sellers who provided only New Zealand tax residency information.

3. Buyers/sellers who provided an overseas tax residency.

The first quarter of data shows that 1% of buyers stated overseas tax residency. However, this figure was unrepresentatively low as any non-tax resident buyer who entered into the contract before 1 October was exempt from the new disclosure requirements.

The second quarter ending 31 March provided more useful data, as about 11 per cent of transactions were exempt from providing information due to their contract date.

In the second quarter, for 50 per cent of transfers, buyers stated New Zealand tax residency. For 37 per cent, buyers did not need to provide tax information because they were purchasing their own home or met one of the other exemptions, and for just under 3 per cent of transfers, buyers stated an overseas tax residency.

This data covers all property transfers, not just residential property.

Purchaser surveys

The second set of data relating to residency of buyers is based on answers to further questions posed by LINZ. To determine whether the property was residential, buyers were asked if the transfer ‘involved land that had a home on it?’.

In the six months to 31 March, 90 per cent of of the transfers for which a response was provided included a‘yes’ response.

To determine the level of connection to New Zealand, those 90 per cent were then asked if they or an immediate member of their family were ‘NZ citizens or holders of NZ residency, work or student visas. Seven per cent of respondents said ’no’.

LINZ then analysed that 7 per cent to determine how many were trust companies, businesses and other entities. This left around 3 per cent as non-resident purchasers of residential properties.

ENDS

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