Double Taxation Agreement between New Zealand and UK: A Quick Overview
The Double Taxation Agreement (DTA) between New Zealand and the United Kingdom provides a framework for the taxation of income earned in either country by residents of the other country. It is designed to prevent double taxation, which occurs when the same income is taxed twice by both countries. The agreement was last updated in 2018 and came into force on 1 January 2019.
Scope of the Agreement
The DTA applies to residents of both New Zealand and the United Kingdom. Residents are defined as individuals, companies and other entities that are liable to tax in either country by reason of their domicile, residence, citizenship or incorporation. The agreement applies to various types of income such as:
– Dividends
– Interest
– Royalties
– Capital gains
– Pensions
– Income from employment
The agreement also provides rules for the taxation of income from shipping and aircraft operations, as well as income earned by artists, sportsmen and entertainers.
Taxation of Income
Under the DTA, income is generally taxed in the country where it is earned. However, certain types of income may be subject to tax in both countries. In such cases, the DTA provides relief from double taxation in the form of tax credits or exemptions.
For instance, dividends paid by a company resident in one country to a resident of the other country are generally subject to withholding tax. However, the DTA limits the withholding tax rate to 15% in most cases and provides for a tax credit in the other country for the tax paid in the source country.
Similarly, capital gains on the sale of shares or other assets are generally taxed in the country where the seller is resident. Under the DTA, gains from the sale of shares in companies are taxable only in the country where the seller is resident, unless the shares derive more than 50% of their value from immovable property situated in the other country.
Conclusion
The Double Taxation Agreement between New Zealand and the United Kingdom provides a framework for the taxation of income earned by residents of both countries. It aims to prevent double taxation and provides relief in the form of tax credits or exemptions. The agreement helps to promote trade and investment between the two countries by providing certainty and predictability in the tax treatment of cross-border transactions. As a professional, it is important to note that using keywords such as «double taxation agreement,» «DTA,» «New Zealand,» and «UK» can help increase the visibility of this article on search engines.