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RL 3: Associated persons: who must pay, and how?
or “How buyers pay tax when buying property from someone they're connected to”
You could also call this:

“Calculating the amount of Residential Land Withholding Tax to pay when buying residential land”

You need to pay or withhold Residential Land Withholding Tax (RLWT) when you buy residential land. The amount you pay is the smallest of three calculations:

  1. The first calculation is the RLWT rate times the difference between the price you’re paying and what the seller paid for the land. The RLWT rate depends on whether the seller is a company or not.

  2. The second calculation is 10% of the price you’re paying for the land.

  3. The third calculation is the price you’re paying, minus any money needed to pay off mortgages on the land, minus any unpaid local council rates.

You pay RLWT on each part of the purchase price, up to the full amount you’re paying. All these calculations don’t include GST.

If you’re the seller or the seller’s lawyer, you can subtract the money needed to pay off mortgages. These mortgages must be with banks or licensed non-bank deposit takers.

The law calls the price you’re paying the “current purchase price”. This includes any deposits or part-payments you’ve made.

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Next up: RL 5: Paying RLWT

or “How to pay Residential Land Withholding Tax to Inland Revenue”
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Part R General collection rules
Residential land withholding tax

RL 4How much RLWT?

  1. The total amount (RLWT) that the relevant person described in section RL 2 or RL 3 must pay or withhold for residential land purchase amounts is equal to the lesser of the amounts described in subsections (2), (4), and (6). The RLWT is paid or withheld for each residential land purchase amount, up to the maximum of the relevant residential land purchase amount. All amounts in this section are GST exclusive.

  2. For the purposes of subsection (1), the amount is the greater of zero and the amount calculated using the formula—

    RLWT rate × (current purchase price − vendor’s acquisition cost).

    Where:

    • In the formula in subsection (2),—

    • RLWT rate means the rate provided in schedule 1, part A, clause 1, table 1, row 5 or, if the vendor is a company that is not acting as a trustee, the rate provided in schedule 1, part A, clause 2:
      1. current purchase price is the purchase price agreed by the vendor and purchaser for the disposal of the residential land, including deposits and part payments, that the residential land purchase amount relates to:
        1. vendor’s acquisition cost is the purchase price paid by the vendor for their acquisition of the residential land.

          1. For the purposes of subsection (1), the amount is calculated using the formula—

            0.10 × current purchase price.

            Where:

            • In the formula in subsection (4), current purchase price has the same meaning as in subsection (3)(b).

            • For the purposes of subsection (1), the amount is the greater of zero and the amount calculated using the formula—

              current purchase price − security discharge amount − outstanding rates.

              Where:

              • In the formula in subsection (6),—

              • current purchase price has the same meaning as in subsection (3)(b):
                1. security discharge amount is—
                  1. zero, if paragraph (ii) does not apply:
                    1. the total of the amounts required by licensed security holders to discharge their mortgages or other securities over the residential land, if the relevant person who must pay RLWT is the vendor or the vendor’s conveyancer:
                    2. outstanding rates is the amount of local authority rates outstanding.

                      1. In this section, licensed security holder means a person who has a mortgage or other security over the relevant residential land, if that person is—

                      2. a registered bank:
                        1. a licensed non-bank deposit taker.

                          Notes
                          • Section RL 4: 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 4(1): amended (with effect on 1 July 2016), on , by section 97 of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 (2017 No 3).
                          • Section RL 4(3)(a): amended, on , by section 15 (and see section 3 for application) of the Taxation (Income Tax Rate and Other Amendments) Act 2020 (2020 No 65).
                          • Section RL 4(8)(b): amended, on , by section 232(1) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
                          • Section RL 4 list of defined terms licensed non-bank deposit taker: inserted, on , by section 232(2) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).