Person required to pay RLWT (the paying agent and the withholding agent)
(Clauses 35, 36, 41, 44 and 45)
Summary of proposed amendment
The vendor’s conveyancing agent will be the paying agent for RLWT purposes, and will be required to fulfil the vendor’s RLWT obligations. If the vendor does not have a conveyancing agent, the purchaser’s conveyancing agent will be the paying agent. If neither the vendor nor purchaser has a conveyancing agent, the purchaser will be the paying agent.
If the vendor and purchaser are associated persons, the purchaser must withhold the RLWT.
The concept of a conveyancing agent will be incorporated into the Income Tax Act 2007 through a proposed definition of “conveyancer”. The proposed definition of “conveyancer” in section YA 1 means a lawyer, incorporated law firm, conveyancing practitioner, or incorporated conveyancing firm that provides conveyancing services, as that term is used in the Lawyers and Conveyancers Act 2006, using a New Zealand-based trust account.
Under new section RL 2 the vendor is liable to pay an amount of RLWT, but the vendor’s conveyancer is treated as the agent of the vendor’s agent in relation to RLWT and must make assessments, provide returns and satisfy the vendor’s liability. That is, the vendor’s conveyancer is the “paying agent” in relation to RLWT.
If neither the vendor nor purchaser has a conveyancer as defined, the paying agent for RLWT will be the purchaser, as described in part (b) of the proposed definition of “conveyancer” in section YA 1.
What it means to be a paying agent or withholding agent is discussed in the section titled “New tax type: residential land withholding tax”.
Under new section RL 3, if the vendor and purchaser are associated persons, the vendor is not liable to pay RLWT. Instead, the purchaser must withhold the requisite amount of RLWT in a separate bank account, segregated from other money, for the benefit of the Commissioner of Inland Revenue.
In this case, the purchaser will have a withholding tax obligation under section BE 1 and the standard requirements for other withholding taxes will apply.
The purchaser will not be precluded from using the services of a conveyancer to fulfil their RLWT obligations.
Not the vendor’s agent for other purposes
While the paying agent is considered to be the vendor’s agent for the purposes of RLWT, new section RL 2(3) ensures that the paying agent will not be considered the vendor’s agent more generally, just because of their role as the RLWT paying agent.
New section RL 2(4) ensures that a paying agent who is only the vendor’s agent in relation to RLWT will not be subject to sections HD 2 to 4, which relate to agents.
No liability for underlying RLWT
New section RL 2(5) provides that a paying agent will not be jointly and severally liable in relation to the vendor’s RLWT debt, despite their obligation to satisfy the vendor’s RLWT liability.
They may, however, be liable for the RLWT debt, if they have retained the RLWT amount from a residential land payment amount and have failed to pay the retained RLWT to the Commissioner.
New section RL 2(6) provides that the rules relating to penalties as set out in the Tax Administration Act 1994 will apply.
Cost recovery by paying agent
While it is not included in the bill, a paying agent is not precluded from recovering the costs incurred in satisfying the vendor’s RLWT obligations.