Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Definitions and related matters - Residence and source in New Zealand

YD 6: Apportionment of income from sea transport

You could also call this:

“How income is split for overseas shipping companies operating in New Zealand”

When you’re not from New Zealand and you make money from moving people or things by ship from New Zealand to other countries, this is what happens:

Only 5% of the money you make is treated as coming from New Zealand. The rest is treated as if it didn’t come from New Zealand.

Sometimes, the Commissioner can lower the amount that’s treated as coming from New Zealand. This can happen if your home country would treat money made by a New Zealand person doing the same thing in your country as not coming from there or as money that doesn’t need to be taxed.

You can’t claim any money you spend or lose on this business as a deduction under section DW 3.

If your ship starts at a New Zealand port and then stops at another New Zealand port before leaving the country, it’s still treated as if it went straight to another country.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1523147.

Topics:

Money and consumer rights > Taxes

YD 5B: Attribution of income and expenditure to permanent establishment in New Zealand, or

“How to calculate income and expenses for your New Zealand-based permanent business location”

YD 7: Apportionment of film rental income, or

“Old rule about dividing film rental income no longer applies”

Part Y Definitions and related matters
Residence and source in New Zealand

YD 6Apportionment of income from sea transport

This section applies when a non-resident derives an amount of income from transporting people or property by sea from New Zealand to a destination outside New Zealand.
Five percent of the amount is treated as having a source in New Zealand and the remainder of the amount is treated as not having a source in New Zealand.
Despite subsection (2), the Commissioner may reduce the amount that is treated as having a source in New Zealand to the extent to which the country in which the non-resident is resident would treat an amount derived by a New Zealand resident from sea transport from that country as—
not having a source in that country:
otherwise as exempt from, or not liable to, income tax in that country.

The non-resident is denied a deduction under section DW 3 (Non-resident general insurers and shippers) for expenditure or loss incurred.
The transport of people or property from a port in New Zealand is treated as transport to a place outside New Zealand even if the ship calls at another New Zealand port before leaving New Zealand.

Compare

2004 No 35 ss FC 18, FC 19

Notes

Section YD 6(3)(b): amended, on 29 March 2018 (with effect on 1 April 2008 and applying for the 2008–09 and later income years), by section 249(1) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
Section YD 6(4): amended, on 2 November 2012, by section 159 of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).