AIP Visa & Tax Residency: What Foreign Investors Need to Know

The Government has announced details of proposed legislation that will allow holders of the Active Investor Plus (AIP) visa to purchase (or build) residential property worth $5 million or more.  This is a significant development for high-net-worth individuals considering New Zealand’s “golden visa”.

However, with the excitement comes a crucial question; does purchasing such a property automatically make you a tax resident in New Zealand?  While the question may seem simple, the answer is far from straightforward.  The answer hinges on one of the more complex aspects of tax law, the permanent place of abode (PPOA) test.

Unlike the day-count test, which simply relies on how many days you are physically present in New Zealand, the PPOA test is far more nuanced.  As we have explored in this article, the PPOA test is far more detailed.  This is demonstrated by the fact Inland Revenue released over 200 pages of commentary in late 2024 setting out the Commissioner’s opinion of tax residency.

So what is a PPOA? Unfortunately, there is no line in the sand or magic detail that means that you will have, or will not have, a PPOA.  A PPOA is not defined but is interpreted based on caselaw as well as reference to Inland Revenue’s Interpretation Statements.  There is no one size fits all approach as everyone’s circumstances will be different.

What makes a PPOA particularly challenging is that owning a property is only the starting point, but you can also have a PPOA if you do not own a property.  It is necessary to first determine is there a place of abode.  This can be owned or rented.  It might not even be rented by the person living in the house, but it could be rented by their employer.  This can still become a PPOA in certain circumstances.  If you have a place of abode then it is necessary to consider the ties that you have with that place of abode and to some extent, the wider ties that you have with New Zealand.  This requires an in-depth review of significant amounts of information in order to determine whether or not there is a permanent place of abode in New Zealand for your individual circumstances.

Investors considering purchasing a property in New Zealand once the rules are amended, need to consider the tax implications of their purchase. For some investors, the property may serve as an occasionally used holiday home; for others, it could become the focal point of their family life and lifestyle in New Zealand.  Determining tax residency status depends heavily on the specific facts and degree of connection involved and no two cases are ever the same as every family’s life is different.

It is also important to bear in mind that Inland Revenue generally makes its assessment with the benefit of hindsight. If you have a holiday home in New Zealand which you visit, but you later return to New Zealand and move into that holiday home, it is possible that Inland Revenue may consider that your holiday home was a PPOA prior to formally moving into the house.

For high-net-worth individuals and advisers, the key message is this, the concept of PPOA is complex, fact-driven and highly dependent on individual circumstances. Although Inland Revenue’s commentary runs to hundreds of pages, there is still no definitive test. Owning a property in New Zealand may, or may not, make you a tax resident. 

We have many clients who own property in New Zealand, spend time at that property, but it is not their PPOA.  On the other hand, we also have clients where it is their PPOA.  In some cases, having a PPOA will not matter, but in most cases, a client will not want to become New Zealand tax resident sooner than they have to.  This is why it is important to get tax advice as soon as possible.  In an ideal world, we would advise clients prior to purchase to ensure they can structure things in the most tax efficient way. The consequences of getting it wrong can be significant, from unexpected liability for worldwide income to double taxation issues.

At Johnston Law, we specialise in the advising on migrant tax issues, including tax residency.  We understand the case law, the Inland Revenue guidance, and most importantly, how to apply them to your unique circumstances.

If you are considering purchasing a property in New Zealand once the law changes are made, please contact us for tailored advice.

This article is intended for informational purposes only and should not replace specific tax advice. For personalised advice on all tax issues please contact us.

This article was accurate at the time of publishing.