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RL 1: Residential land withholding tax
or “Tax on selling residential property for overseas owners”
You could also call this:

“Residential land sellers must pay tax through their lawyer when selling property”

When you sell residential land, you need to pay Residential Land Withholding Tax (RLWT). The amount you need to pay is set out in section RL 4.

Your lawyer, or the buyer’s lawyer if you don’t have one, will handle the RLWT for you. They will file the returns and pay the tax on your behalf. However, they are only responsible for the RLWT and not for any other taxes or obligations you might have.

Even though your lawyer is handling the RLWT, you are still the one responsible for paying it. If your lawyer doesn’t pay the RLWT properly, they might get in trouble with the tax office, especially if they took money from the sale to pay the tax.

Your lawyer won’t be penalised if they made a mistake because they relied on information you gave them, as long as it was reasonable for them to trust that information.

When your lawyer takes money from the sale to pay the RLWT, it’s treated as if you received that money when you got paid for the land. This means it’s considered part of what you earned from selling the land.

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Next up: RL 3: Associated persons: who must pay, and how?

or “How buyers pay tax when buying property from someone they're connected to”
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Part R General collection rules
Residential land withholding tax

RL 2Vendors: who must pay, and how?

  1. The vendor is liable to pay the amount of RLWT provided in section RL 4.

  2. The vendor’s conveyancer, or if the vendor does not have a conveyancer, the purchaser’s conveyancer, is treated as the agent (the paying agent) of the vendor in relation to the RLWT, and, in relation to the RLWT, must provide returns and satisfy the vendor’s liability.

  3. The paying agent is not treated as the vendor’s agent for income, or for a tax obligation other than RLWT, solely because of their agency in relation to RLWT.

  4. Sections HD 2, HD 3, and HD 4 (which relate to agents) do not apply to a paying agent that is agent only in relation to RLWT.

  5. The paying agent, as agent in relation to the RLWT, is not jointly and severally liable in relation to the vendor’s RLWT or in relation to a debt under section RA 10 (When obligations not met). The vendor alone is liable to pay the RLWT, despite the paying agent’s obligation to satisfy the vendor’s liability.

  6. Despite subsection (5), if the paying agent fails to satisfy the vendor’s liability, then,—

  7. for the purposes of Part 9 of the Tax Administration Act 1994, the paying agent is treated as failing to pay an amount of withholding tax equal to the amount of RLWT liability they failed to satisfy, if the paying agent has subtracted or retained an amount from a residential land purchase amount; or
    1. for the purposes of Part 9 of the Tax Administration Act 1994 other than section 139B, the paying agent is treated as failing to pay an amount of withholding tax equal to the amount of RLWT liability they failed to satisfy, if the paying agent has not subtracted or retained an amount from a residential land purchase amount.

      1. A paying agent is not liable for a penalty under Part 9 of the Tax Administration Act 1994 for a failure described in subsection (6)(b) if, for that failure,—

      2. the paying agent has relied on a form and accompanying documents given to them in accordance with section 54C of the Tax Administration Act 1994; and
        1. the paying agent’s reliance on the form and accompanying documents is reasonable.

          1. An amount subtracted or retained from a residential land purchase amount by a paying agent to satisfy the vendor’s RLWT liability—

          2. is treated as received—
            1. by the vendor; and
              1. at the time the residential land purchase amount is paid to them; and
              2. is treated for the purposes of this Act as derived by the vendor at the same time and in the same way as they derive the residential land purchase amount.

                Notes
                • Section RL 2: inserted, on , by section 49 of the Taxation (Residential Land Withholding Tax, GST on Online Services, and Student Loans) Act 2016 (2016 No 21).
                • Section RL 2(6)(a): amended, (with effect on 1 July 2016), on , by section 96(a) of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 (2017 No 3).
                • Section RL 2(6)(b): amended, (with effect on 1 July 2016), on , by section 96(b) of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 (2017 No 3).
                • Section RL 2(8): amended, (with effect on 1 July 2016), on , by section 96(c) of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 (2017 No 3).