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Income Tax Act 2007

Definitions and related matters - Residence and source in New Zealand

YD 8: Apportionment of premiums derived by non-resident general insurers

You could also call this:

“How overseas insurers' income from NZ customers is taxed”

When you pay for insurance, sometimes the company that insures you isn’t based in New Zealand. This law talks about how to handle the money they get from you.

If an overseas insurance company gets money from you for certain types of insurance, and they don’t have a business set up in New Zealand, part of that money is treated as if it came from New Zealand. Specifically, 10% of the money you pay is seen as coming from New Zealand, and the other 90% isn’t.

This applies to general insurance and some special types of guarantees. It matters if you bought the insurance in New Zealand, if you live here, or if you’re using it for a business you run in New Zealand.

The overseas insurer can’t claim any expenses for this 10% of money. They also have to follow special rules about paying tax and giving information to the government.

However, if all the risks the insurance covers are outside New Zealand, and the insurance company isn’t connected to you in any way, then none of the money is treated as coming from New Zealand.

Section HD 16 and Section HD 17 have more information about what the insurance company needs to do about taxes and paperwork.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1523152.

Topics:
Money and consumer rights > Taxes
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Part Y Definitions and related matters
Residence and source in New Zealand

YD 8Apportionment of premiums derived by non-resident general insurers

  1. This section applies if—

  2. a premium is paid under a contract of insurance; and
    1. the insurance is of 1 of the types listed in subsection (4); and
      1. when the insurer derives the premium, they are a non-resident; and
        1. the premium is not attributable to a business of the insurer which they carry on in New Zealand through a fixed establishment in New Zealand; and
          1. the premium is treated as connected with New Zealand under any of the tests of connection in subsection (5); and
            1. subsection (6) does not apply to override subsection (5).

              1. Ten percent of the gross premium is treated as having a source in New Zealand and the remainder of the gross premium is treated as not having a source in New Zealand.

              2. The following provisions apply in relation to taxation of the 10% amount:

              3. the insurer is denied a deduction for expenditure or loss incurred, under section DW 3 (Non-resident general insurers and shippers):
                1. sections HD 16 (Non-resident general insurers) and HD 17 (Agent paying premiums to residents of Switzerland) apply to impose certain obligations in relation to payment of income tax and provision of tax returns and other information.

                  1. The types of insurance referred to in subsection (1)(b) are—

                  2. general insurance:
                    1. a guarantee against risk given by an insurer to an insured person if—
                      1. the insured person is liable to pay a premium to the insurer for the guarantee; and
                        1. the insured person is associated with the insurer:
                        2. a guarantee against risk given by an insurer to an insured person if—
                          1. the insured person is liable to pay a premium to the insurer for the guarantee; and
                            1. the risk arises from money lent to the insured person; and
                              1. the amounts the insured person is liable to pay for the money are significantly less than they would otherwise have been because of the guarantee; and
                                1. the effect of the guarantee on the amounts payable is more than an incidental effect, or comes about as more than an incidental purpose, of the insurer’s giving the guarantee.

                                2. The premium is connected with New Zealand if—

                                3. the insurance contract from which the premium is derived is offered or entered into in New Zealand:
                                  1. the insured person is resident in New Zealand:
                                    1. the insured person is a non-resident but enters into the insurance contract for the purposes of a business they carry on in New Zealand through a fixed establishment in New Zealand.

                                      1. Despite subsection (5), the premium is treated as not connected with New Zealand if—

                                      2. all risk covered by the premium is located outside New Zealand; and
                                        1. the insurer deriving the premium is not associated with the insured person.

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                                          Notes
                                          • Section YD 8(3)(a): amended, on , by section 161 of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).