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Overseas housing speculators could face New Zealand withholding tax

Xinhua, August 31, 2015 Adjust font size:

Foreign property speculators could face a withholding tax on selling New Zealand assets in order to ensure taxes on gains are paid, under proposals revealed by the government Monday.

Revenue Minister Todd McClay said the government was seeking public feedback on the proposal, which would apply only to offshore property sellers.

The move was an important part of the government's measures to curb investment in the overheated housing market.

Last week, the government introduced a tax bill that would require income tax paid on any gains from homes bought and sold within two years, excluding on an owner's main home, inherited property or relationship settlement transfers.

"The objective is to target those people who are seeking to make a quick gain from property, whether they are based in New Zealand or overseas," McClay said in a statement.

"However, it can be more difficult to collect tax from people speculating on property in New Zealand if that seller lives overseas. For this reason we are proposing that a portion of the sales proceeds are withheld at the time of sale and paid to Inland Revenue as a pre-payment or bond against any tax that may be due," he said.

"We want all people buying and selling property for profit to know that we expect due taxes to be paid."

House prices in the biggest city of Auckland -- home to a quarter of New Zealand's population -- surged by 24 percent over the past year, compared with 3 percent for the rest of the country, Reserve Bank of New Zealand (RBNZ) deputy governor Grant Spencer said last week.

Investors accounted for 41 percent of Auckland house purchases, up 8 percentage points since late 2013.

The trend was increasing the risk to the country's financial stability in the event of a sharp fall in prices.

In May, the RBNZ had modified its loan-to-value ration (LVR) policy for mortgage lending by commercial banks to specifically target Auckland residential investors, while easing restrictions in the rest of the country. Endi