That's a good question. Firstly, it depends on whether your company is a Look Through Company (LTC) or not. If it is, then it may be that your company can buy you a car and there will be little or no Fringe Benefit Tax (FBT) to pay. See here for more info.
If not, then FBT needs to be considered. However, before we get into that we'll discuss the two ways to use a vehicle in your business.
1. Business use of a private vehicle
This means that you own the vehicle in your personal name. You can claim business use of the vehicle up to a point: either claim 25% of total usage costs as a business expense, or claim (possibly) a larger proportion if you keep a logbook, or claim using standard mileage rates as provided by IRD or organisations like AA. There are some limits, rules and regulations around these provisions so make sure you get your maths right!
2. Company-owned vehicle
In this scenario you will have to pay FBT for private use. More about that below. In some situations there is no FBT to pay. However, generally speaking if you are a small business owner and you have a company-owned vehicle there will usually be some FBT to pay (or a personal contribution towards the cost of your private use).
This brings us to...
Fringe Benefit Tax (FBT)
What is it?
FBT is a tax you pay on a fringe benefit. That is, you get some sort of benefit from your company, but it is not wages. The Law says you have to pay tax on that.
How is it paid?
You elect to pay FBT by advising IRD; you can pay at different intervals, generally quarterly or annually.
How is it calculated?
Here are the IRD calculators. Enjoy.
Is it compulsory?
Hmm, it depends on the circumstance. Talk to your accountant. There is not a blanket answer that fits every circumstance.
Perhaps an example would help. Let's say you have a Holden Commodore, purchased for $50,000 incl GST within the last 5 years. It is currently worth $20,000 incl GST. It is available on the weekends for private use. No personal contribution is made towards private use. It is not a pooled vehicle.
Method 1: FBT based on original purchase price:
Method 2: FBT based on the depreciated value:
In this example the depreciated value is quite a bit lower, but the % is higher too: 36% instead of 20%. There are a few rules around minimum values and methods which need to be considered too.
See here for the calc. sheets. There are more calculation examples here at the bottom of the page.
What Should I Do?
The best thing is to do the math on each way of accounting for the vehicle, and then work out what will give the best results. And, we suggest you chat to your accountant about it.
The Companies Act 1993 makes the following provisions:
So, in view of these requirements of the Act, your accountant may ask you as a shareholder to sign a resolution stating that you will financially support the company.
Note: If you have a LTC and it has a land-and-build-to-rent project, then it is likely that during the construction phase your LTC will be technically insolvent.
For more information, please call us on 0800 890 132 or contact us here
This means that if you buy rental property in Thailand and it makes a profit, then you'll have to declare that income here in New Zealand as well as in Thailand.
Secondly, there is a Double Tax Agreement between Thailand and New Zealand, so tax paid in each country is taken into account.
How does it work then?
If you own property in Thailand in your personal name then you'd be required to file for it there, and then declare the income here as well. NZ would calculate the tax paid there, and what should have been paid here. If there is a difference in your contra, then you'll have to pay the difference to IRD. If the difference is in your favour, then you don't get a tax credit: you just won’t have to pay any more.
Thailand Tax Information
Corporate income tax rates:
Personal income tax
Info sourced from:
So, you’d need to get advice from a Thailand-based accountant obviously, but a Thai company would pay between 20-23% tax, and then a 12.5% property tax on top. However, as it is all in THB this still may be relatively low in NZD. So this may well be the best way to go.
For the UK, see this article; for Australia, check out this blog; for Malaysia, see here; Singapore? See this article.
We have no affiliation with or endorsement from KPMG or Thailand-Property.com.
Accounting for your rental residential investment property; general taxation advice.