EY points out that double tax agreements with 43 countries mean NZ can't impose new property taxes on their nationals unless we apply them to New Zealanders as well

EY points out that double tax agreements with 43 countries mean NZ can't impose new property taxes on their nationals unless we apply them to New Zealanders as well

By Aaron Quintal and David Snell*

In multinational agreements, not all is what it seems. New Zealand has less freedom to selectively tax foreign residential property owners than the Trans Pacific Partnership Agreement (TPPA)’s provisions suggest. Any tax would need also to apply to New Zealand owners. Even then, its impact may be limited.

Ryan Greenaway-McGrevy correctly highlights in his excellent series on the TPPA that Annex II reserves New Zealand’s rights to tax foreign investors from TPP countries. New Zealand reserves the right to adopt or maintain any taxation measure with respect to the sale, purchase or transfer of residential property (including interests that arise via leases, financing and profit sharing arrangements, and acquisition of interests in enterprises that own residential property).

That sounds definitive. As Greenaway-McGrevy points out, a sufficiently high tax is effectively the same as a ban. A literal reading of the TPPA text suggests that the Government has the ability to impose high taxation on foreign residential property owners.

In reality, though, we gave away most of our rights to tax non-residents more than New Zealanders a long time ago.

The TPPA is not the only, or even main, international agreement regarding tax matters.


New Zealand has entered into a network of 43 double tax agreements (DTAs) with all of our main investment and trading partners, including all TPPA agreement signatories other than Brunei and Peru. DTAs increase certainty for taxpayers and governments in their cross-border dealing, by setting out which country has the right to tax cross-border activities.

Buried deep in the TPPA, is a provision that makes it clear that in the event of a conflict, the provisions of the DTA will prevail.

Many of our DTAs include “non-discrimination” clauses, which mean that New Zealand cannot impose taxes on nationals of our treaty partners unless we impose the same taxes on New Zealand nationals.  We have effectively already curbed our freedom to impose new property taxes that apply selectively to overseas investors. If New Zealand were to tax, say, the gains on sale of property by Canadian nationals, for that tax to stick, we would also have to tax our own nationals in the same way. 

Even if New Zealand decided to tax gains from property sales, there’s a further problem. In most cases, New Zealand’s DTAs appear to give New Zealand the right to tax gains made from real property in New Zealand. Looking at the treaties in a little more detail, however, clouds the issue. Many already restrict our taxing rights over property and have done so for many years. The TPPA’s assurances mean only that the TPPA itself does not interfere with New Zealand’s taxing rights: they do not reverse agreements which have already been made.

The problem lies in the fact that residential property does not need to be owned directly, it can be held through a property-rich company. Rather than selling the property, you can sell the shares in the company that owns the property. For nine countries, we have given away our rights to apply income tax on the sale of shares by a non-resident in a property-rich company. Specifically, we cannot tax residents of Belgium, Denmark, Germany, Indonesia, South Korea, the Netherlands, the Philippines, Switzerland or the United Arab Emirates on gains from the sale of shares in New Zealand real property-rich companies.   

None of the nine, of course, is among the signatories to the TPPA. But without re-negotiation of our existing DTA network, it is possible that a well-advised investor would seek to structure their affairs so as to take advantage of a favourable DTA. It is difficult to stop a resident of a third country from, for example, owning a UAE resident property-rich company and so side-stepping any tax imposed by New Zealand.  Of course, there are anti-treaty shopping rules which attempt to prevent this practice, but their application is patchy. Further, existing DTAs with the nine countries could be re-negotiated to regain taxing rights here, but that is likely to take many years even if all other countries agree.

The risks around selective application of any future tax on the disposal of residential property do not mean that such tax cannot be introduced.  But it is usually a bad idea for the Government to enact law which it knows has defects. Unless the disposal of shares in property-rich companies can be made subject to tax, in our view the risk of avoidance is too high. 

We don’t blame the TPPA in any way for this outcome. Its hollow protection of taxing rights highlights an existing issue, rather than introduces any new problems. Tax is rarely pure and never simple.

Aaron Quintal is a tax partner and David Snell is an executive director at EY.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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More smoke and mirrors. If you wont let us buy land in your country, you can't in ours. One simple change and a big part of the property rort dissapears.


Exactly. And they wonder why many in the UK want out of the EU! Sovereignty and autonomy must be made paramount. Amazing how many are coming out of the woodwork to defend our traitor government/s with all kinds of excuses for doing nothing

Stamp duty imposed at a prohibitive rate (30% of sale) on all pre-existing residential property with a 50% exemption if the registered owner produces a NZ passport(s) and refund the remaining if you live in the property for 12 months. Plus a Council rates levy based on the dwellings' actual accommodation capacity with exemption for owner occupiers.

Speculation by non nationals and companies would be a severe disadvantage over locals who purchase for living in. Landlords would face higher costs and passing this on would give clear benefit to being owner occupiers. Leaving a dwelling unoccupied would cost. For speculators, new immigrants, companies, trusts etc. new build is encouraged as you can avoid all those costs.

The Politicians have been slowly selling the Sovereignty of the Nation down the road......No 2 houses of Parliament to sit and pass laws.........Parliament does not hold up the Constitutional Rights of the People.....A DTA should be seen as an illegal agreement that was not mandated by the people!!

Someone here once observed that a substantial part of the value of a property is the infrastructure that imparts much of that value.

The question that needs to be addressed is how to extract from newcomers a fair-share recompense for that embedded value that has been built up over time at the cost of local residents and taxpayers

There has to be a solution - or else - tear up all the double tax agreements and start again

EY consultants get paid a lot of money to tell people that the macro-level status-quo is inevitable. They have put their intellectual might to working out lots of justifications for why nothing can be improved, nothing can change, other than in ways that increase profits for people who can afford $3k+ per day consultants. Professional Pangloss's

If their clients asked them to come up with ways that the current tax regime could be made more 'efficient' they would be unlikely to come out with the same argument about how nothing can be improved.

One could always abolish the entire taxation system as it sits and introduce an Automatic Payment Transaction Tax APTT on everything across the board......wouldn't really need an IRD or too many Accountants.....and other hanger ons.........regardless of what the transaction is the tax is deducted. And every 3 or so years introduce a slightly different designed cash so as you can trap any black market money back into the system......now that would be efficient and fair!!

Business could concentrate on making money not flippin compliance!

You would find the barter economy growing fairly substantially if such a tax system were put in place, or a black market economy based on a foreign cash currency (AUD, probably, on the basis it'd be easiest to get hold of sufficient quantities)..

Can one prove that these two issues aren't already occurring under our current tax regime? People currently have to work the first half of everyday to pay their taxes and some people have figures suggesting that it takes 7 months of the year to discharge all tax type obligations........so I would think that the current system has more incentives to avoid tax than something like an APT tax..........

'''''any tax would need also to apply to New Zealanders owners'''''

The government rule out the foreign buyer restriction bill in parliament last night ...................

I have executed and entered into a number of legal contracts and joint venture arrangements in my life and as a result I have little regard for who haven't or those lacking in any commercial nous to sit there and bed-wet and snipe over the small stuff...you can't sit there frozen in fear while the world roils around you. If every little rule in every documented contract in small business or large or in government was strictly enforced we'd still live in the stoneage.

If we enacted tax on foreign buyers exactly jack all would happen. I hardly doubt governments of foreign countries are going to start a trade war or call NZ up to the WTO over auckland housing.

low level & poor persuasion, few marks to ey.

we like
so we tell them new information has come to light, we changed our minds and
tax advisor, the first one made a mistake.


When did we loose our imagination and decide tax is the only tool we have. If we decided to tax foreign owners only then we have already decided to discriminate. Why not just make it simple, and just not allow foreign owners to buy New Zealand land at all. New Zealand citizenship should be required to own New Zealand land.

The trouble KH is not NZ discrimination but those who are discriminating against NZ'ers! I really couldn't give a toss who buys what and where.......we all know that anyone can buy assets in NZ but the purchasing right is not reciprocated.....and that is the part that peeves me off when people talk of DTA and that we may only tax foreigners the same as local NZ'ers........well how about those countries we have a DTA with allowing NZ the right to purchase property assets in their country......What a screwed up world we live in and what a screwed up bunch we have had in Parliament over the years......and what a screwed up lot of advisors and other so-called professionals...........I blame the Socialists for this mess have they been systematically pandering or have they been taking back handers??????

How exactly is it the fault of Socialists? Right wing politics/economics encourages the buying up of land and property because that's how you get rich. Right wing follows economic dogma with a blinkered approach and bends over backwards for the almighty dollar, grovels at the feet of foreign countries to sell a few pints of milk and some lamb chops. Socialists may have actually prevented it from happening.

Quite simply Meh it is the socialists who want the tax dollars to spend in the first place that is why I blame them......Socialism has created more needy people than we have ever had before......more people with poor skills.....more people who lack common sense.......more people who only have a narrow area of expertise and therefore a limited capacity to understand the wider issues.......our health care and education systems are dogs......we have people who beat children to death.......we have homeless people............we have police who cannot manage to turn up to burglaries and break ins.......we have innocent people jailed for 20 years...........wakey wakey!

If Right wing people chase $1 in business you can guarantee the socialists wants over 50 cent of it and that is why I blame them!!

Socialists don't sell milk and lamb they sell social problems to the people to obtain capitalist funding.

"Socialism has created more needy people than we have ever had before" ... is it fair to rephrase this to state something more like 'Social safety nets allow the survival of people who otherwise would not' and be clear about the alternative. If we would prefer that some form of modern Darwinism 'culled the herd' so that only the strong and quick survived, then we would arguably have less 'people with poor skills' but as a species that has supposedly evolved compassion and a social consciousness we seem to have somewhere decided that there is value in supporting the survival of a broader range of persons. Can you see any value in this?

Things are not black or white..... socialism vs Darwinism??? There are plenty of ways to do things other than the current system!!

What do you think used to happen prior to all this social policy intervention? People and communities actually looked after themselves once.

I hope you realise that there was education before State schools in NZ and it seems it was a fairly good education too......

Government Social safety nets are rarely of any use to those who need help and that is why voluntary organisations are inundated currently.......Government social safety nets are there for those running the place......so don't go giving me your evolved compassion spiel........

How many socialists employ people? You know give someone a real job? How many socialists put a roof over people's head? How many socialists ensure people are feed and clothed and that their kids attend schools etc?
I don't see too many socialists being known as philanthropists do you?

It is not socialists doing all this work to fund a system it is capitalists! Can you see this?

In any total set of individual items, I have yet to imagine a circumstance where the inclusion of faulty items could be deemed to raise the overall quality of the set. Just saying, keeping the duds does not make anything better, we humans apply this to all other things we have control over, why be hypocritical and exempt ourselves. Clue: subjectivity.

There are many ways to define quality other than just survival skills. Simplistically in the view being suggested here humanity would have been deprived of 'duds' such as Stephen Hawkings or anyone else not capable of taking care of themselves but with potentially other contributions to be made

Do some research, you will find this to be a poor example. He was never a dud, Maybe you could say that if not for Roger Federer we would not have a tennis champion, or Mahatma Ghandi no leader of India, but wait, yes we would, it would just be someone else. Same for all things. And the great immutable truth is; you are unique, just like every body else.

However that was not my point. I was highlighting the hypocrisy of the human condition, that we feel free to ruthlessly manage all other things to our own ends, yet deploy a set of emotive sensitivities in defence of exemption for our own population.

Clue; Don't go there mate it is an intellectual dead end.....Nazism... social eugenics ... final solution..

Although as soon as the war ended the Allies made a mad scramble to get in and seize all the intellectual property they possibly could. Just one example was the IP that was used to build the Apollo rockets to get a man on the moon. It's not an "intellectual dead end just verboten.

Were taxes not originally implemented to fund wars? If the capitalist system worked and a small minority weren't so greedy wanting more power, more profit, the serfs (workers) wouldn't be going without and we wouldn't need socialism. Right wing wants taxes just as much as socialists do - buying/bribing voters is not socialism, if anything it's capitalism.

The issues you note above are not a fault of socialism. They are a fault of society, of mankind, of the breakdown in community. They are a fault of the misunderstanding of "the survival of the fittest", the result of competing against each other rather than co-operating, they are a fault of trying to fix everything with legislation, they are a fault of our own greed and selfishness.

Mankind creates social problems because we're too damned greedy and brainwashed, ignorant and selfish. It's easier to blame others than look at how our own actions contribute to any situation.

Totally agree

We have had taxes in NZ from the get-go.....here is a little history.






Speak for yourself Meh....because many of us are independent, never created any problems, never received anything from any Government Agency, help and assist our families, friends and communities and other individuals when the need arises.......

The breakdown in community happens when people refuse to pay twice once in their taxes and once again on a voluntary basis and we don't have that in NZ as yet......the fact is the Government delivery system is irreparably broken and voluntary organisations have stepped up in every direction.......and so have private organisations who directly compete to deliver the same services as a Government Agencies e.g. health, education, security services etc.

NZ has socialist Governments and politicians, and political parties......don't think because something looks like business, smells like business then it must be business and place that into a capitalist box unless that business never takes anything from a Government or its Agencies.......

If we keep heading down this socialist path we will become communist in no time at all.....and then some of you are going to learn what survival of the fittest is actually all about!!

As link one shows - apart from customs duties (gst) which one could avoid paying if they didn't consume, the first direct tax forced on citizens was to fund war.

I agree that the government/political system is broken and that is the responsibility of all of us. My comments aren't aimed at you personally or individually - I look at it as being the collective and we are all part of the collective whether we like it or not.

The breakdown in everything is because of our belief in "wealth" as measured by money, because we have allowed ourselves to be ruled by man made systems that refuse to acknowledge natural laws. People don't pay twice because they're too busy trying to pay the first time - taxes, cost of life. The voluntary system used to exist before we allowed ourselves to be taken over by money, economics, politics. and the banking system.

If it walks like a duck, sounds like a duck, it must be a duck. Don't confuse nanny state (fascism) with socialism. The communism argument is so flawed it's not funny. Communism in it's real form has never been applied. Russia, China, North Korea etc were/are pure dictatorships, ruling others with fear, much like the current capitalist system which rules with money and the illusion of scarcity.

All of the man made systems are broken and they are impacting the one natural system that sustains human life - the planet and nature itself. We think we are the superior, intelligent species yet we are extremely dumb. We lack foresight and wisdom. We keep applying the same "knowledge" over and over again expecting a different result. Insane.

I think you should go back and read the comments again.

You have attacked capitalism as being the cause event even though the system we have is not capitalism.......you then state that we wouldn't need socialism if it wasn't for the capitalist greed.

I pointed you to early taxation which you fobbed off.....the early system of taxation was implemented by Hobson who wasn't even an elected official and the tariffs (not GST) he introduced was the start of the Socialist nonsense we have today........we have never had a capitalist system in NZ!! Ever!!

I am a capitalist and I bloody well object when people say I am greedy, lucky or whatever else.......I consider a capitalist as someone who stands on their own two feet financially that means I can look after my family, friends and other community needs............BUT........ I am perpetually harassed to complete a multitude of compliance and regulatory features that the system has implemented.........there is not one benefit to myself in doing this work. so I strongly object to people who think that honest business people like myself somehow owe you or the system some sort of lifestyle.......I don't owe you or the system anything the system owes me and my family for they are the people who suffered from lack of income or time when it is these things that get stripped from an individual through the socialist policies ............

......when we have a system that comprises approximately the same population number of public servants, bureaucrats and politicians to those in the lower income bracket and then think that more people need to be in that first group to help the second group which increase proportionately then it is you who has the flawed argument by thinking that this system is achieving or necessary.......intelligent species doing the same things over and over again expecting a different result while screwing the planet is the socialists plan.........and in NZ we have been dong it since 1840!

Stepping back a bit it seems that all human societal systems suffer from some common symptoms, regardless of their ideological purity. Over time power and control concentrates in fewer and fewer hands. As the old saying goes, it's not that power corrupts, it attracts the already corrupt.

Bureaucracies form to keep control and justify the status-quo, and that seems to be more about human nature than the effectiveness of Capitalism, Socialism or Communism. In nature a forest gets clogged up with undergrowth, and the big trees leech all nutrients from the soil. Then every so often a big fire comes along, burns it all down, makes the soil rich and healthy, and the cycle starts again.

The challenge in the human context seems to be how do we build in some type of cycle of healthy destruction of these concentrations of power and bureaucracy without burning the whole forest down (which many now seem to think is the only solution)

Utopia can never be achieved. Capitalism laced with a healthy dose of socialist intervention, to keep things in perspective perhaps.

You have your stuff that all benefit from and contribute to, which a democratic society may choose what is and what isn't included, and once you've chipped in your bit toward those things, you can knock yourself out pursuing what you want to pursue (I just happen to think that playing casinos with housing should not be one of the latter).

Mr label man (notaneconomist), would you still describe yourself a capitalist if you lost the ability stand on your own feet and fail in being able to look after your family?. Perhaps though no fault of your own (perhaps after a health event or disaster). You are no more an island of autonomy than I am, just be pleased you have the illusion of self determinism for the moment. You don't owe me (or vice versa) anything in terms of a contribution to our own respective chosen lifestyles, but if the shit hits the fan you (and I) will be pleased for a bit of charity. I might describe that as socialism, you might call it insurance. The devil is in the details.

Mike Hosking couldn't have said it better. There's a future for you in media.

Indeed, in fact, I believe they are dropping like flies in the streets of Oslo and Bergen, as we speak.

Well the Australians have no trouble doing this. Were their negotiators a lot smarter than ours? On the basis of how little we stand to gain from the TPPA compared to what we yielded it would seem so.
And we naively believe that we can advise the British how to negotiate international trade deals.
This seems to be the sort of loss of sovereignty that creeps in with trade agreements. Is it any wonder that the British want out of the EU.

will the TPPA agreement still go ahead if the Americans don't sign?


I thought that Key and his cronies promised that while we could not stop foreign purchases under the TPPA agreement, we could effectively do the same thing by taxing foreign owners. Now we learn that we cannot even do this.
More John Key Lies?

his lips were moving, of course it was lies.

Exposed but too thick skin to feel ashamed and rectify. Remember the saying that Karma is B

If govt wants to act can act but where their is no will their is no way. Housing market is in rampage mode and govt enjoying as a spectator.

People of any country expect their elected govt to work for them and not in the interest of only foreigners. Shame not to govt but to us for electing them.

Winston peter has good chance of capturing the imagination of the people as now what he says make sense. Why do you feel Brexit happened or Donald trump. Watch out next what happen in NZ. JK would be surprised.

We could solve this, and the problem of tax avoidance by NZ property investors by levying tax on a deemed rate of return on the total capital value of the property, say 33% of the prevailing mortgage interest rates plus say 2% i.e. 33% of currently about 6% of the C.V or 2% per year of the C.V. This tax could be offset by any other taxes paid on the particular property i.e. ring-fenced.

So if we cannot tax them, then change the laws that allows them to buy exisiting housing stock.

Again the Australians are doing that but can we? Sounds like once again their negotiators are a whole lot smarter.

Land tax can be imposed as put forward by govt as one of the option. Now as the govt is being pushed against wall slowly and steadily and no more able to deny and avoid is trying to hide behind TPPA and is creating that lie through medià.


If there was ever any doubt as to who is buying North Shore properties please feel free to visit the Barfoot and Thompson auctions in Takapuna on a thursday morning ( 10am start ). In fact John Key should probably stick his head in the door. I was there this morning with a friend and we both came to conclusion that about 95% of the people in the crowded room were of Asian decent. That takes into account buyers, sellers and the agents. I was gobsmacked as was my friend. I stayed for the first 10 sales and bidding was active with several parties bidding up the price for the same property. They were hoovering them up! Great for the vendor but when I see the price of an average home in Glenfield going for the best part of 1 million dollars then I shake my head in disapointment that it has gotten this bad. The gate is open and the horse has well and truly bolted. I don't believe there's any coming back from this as so much of AK real estate has already been purchased by these people. You've lost my vote John Key.

FYI, here's a press release from Labour on this story;

EY: TPP stamp duties on foreigners may have to apply to Kiwis  

The Government’s claim that a TPP-enabled tax on foreign buyers would amount to a ban has been exposed as folly by tax experts, who say that in most cases a tax would apply to Kiwi buyers too, says Labour’s Trade and Export Growth spokesperson David Clark. 

“EY tax partner Aaron Quintal and executive director David Snell’s article says New Zealand’s rights to tax foreign investors from TPP countries are overridden by double tax agreements, many of which require that a tax on foreigners from certain countries should apply to New Zealanders too if there’s a conflict. 

“New Zealand has double tax agreements with all TPP countries apart from Peru and Brunei. 

“This shows the Government’s pretence that the foreign buyers’ tax could effectively be a ban on foreign buyers was pure myth. 

“The only way to cut foreign speculators out of the housing market and stop them driving up prices is by imposing a ban on them buying existing housing. It’s simple and effective. Sadly the Government refused to argue for this protection in TPP negotiations, despite other countries securing an exemption. 

“National left New Zealanders high and dry in TPP negotiations. Meanwhile the housing crisis gets worse and worse,” says David Clark.

And just a few short months ago, Key was criticizing a Labour or Green proposed bill because it would compromise future governments ability to change laws so it would not be democratic (someone will remember what it was). I do not know how he managed to do that with a straight face after what we have been stitched up to.

And the sycophantic mainstream media will let this slide by without saying a word. Why did it take so long for the opposition to say anything, they had full access to the documents. Not just Labour but also NZ First? This needed Key's lying to be exposed within a day of it occurring.

It would be great if the authors could engage in the debate (and hopefully they don't feel constrained now that it's gone political from offering objective responses, which are inherently apolitical anyway). Especially in response to those here similarly engaged constructively. Such as the suggestions that AU seems able to do so, that stamp duty may be another option, and generally beyond saying what won't work, suggesting options that might be viable and effective policy options. It would be really useful, adding considerably to the quality of debate. As to which, in any event, thanks for contributing. (And Interest for a unique platform enabling genuine debate)

Great piece of info and nice article ... when you subscribe to or want to join a club there are rules to respect and there is a joining fee, plus there is a dressing code, and other duties, responsibilities, and restrictions .... there are apparent fees and some hidden ones ... so why are some of us surprised with few fine prints here or there revealed every now and then ? , it's all part of the membership of the club , or else!!.....please remember that we cannot have our cake and eat it too ... to enjoy being part of the first world ( OECD and others) there is a price to pay and small boys cannot dictate membership rules in the terms and conditions .... hence to all those hopeful that the housing crisis is easy to solve, think again! it is quite complicated, especially when NZ becomes a safe haven to park money....

Where their is a will their is a way.

Intention is missing. Understand that the crisis is hard but we do not see any efforts to try also but warning and denial.


Wow, and we don't see this kind of thing in mainstream media because?........it's corrupt, or maybe........it's corrupt.

Unfortunately I doubt NZ could just declare tax independence. We have to honour our agreements- whatever's in them. At best we could only attempt to negotiate some of our independence back. What a mess!

Who is to be blamed.

Well lets face it our Government doesn't want to do anything about our out of control housing market and restricting the influence of non-resident property investors, since it doesn't want to destroy the illusion of our economic growth.