In a tax case Van Uden v Commissioner of Inland Revenue [2018] NZCA 487 the decision was delivered on 08th November 2018. High court decision was upheld in the favor of IRD explaining New Zealand Tax Residency and Permanent Place of Abode Test.

The decision confirms the interpretation of permanent place of abode as set out in Commissioner of Inland Revenue v Diamond [2015] NZCA 613. Permanent place of abode in New Zealand can be seen as “a home in New Zealand”

This case provides very good explanation on New Zealand Tax Residency and Permanent Place of Abode Test.

The permanent Place of Abode test overrides 183 days test for New Zealand Tax Residency.

Facts of Case:

1. Gerardus van Uden (Taxpayer), is a ship’s captain. For the last 40 years he has worked for an overseas shipping company, the China Navigation Company Ltd.

2. IRD assessed taxpayer for New Zealand income tax for the 2005 to 2009 tax years. Based on he had Permanent Place of Abode (PPOA) in NZ.

3. Taxpayer holds a New Zealand passport and a Dutch one. He was born in New Zealand in 1957 to Dutch migrant parents. Taxpayer lived with his family in the Papatoetoe area, and attended local schools.

4. In 1975 Taxpayer signed on with China Navigation as a navigating cadet. In 1994 he was promoted to captain. Typically, he spends about 8 months in a years’ time on ship.

5. He got married in 1980 and lived in the Philippines from 1980 to 1987. In late 1987 taxpayer moved to NZ, purchased a house in Mangere Bridge and lived there till 1995, when taxpayer and his wife separated and later divorced.

6. In 1998 taxpayer got remarried. Mr and Mrs van Uden remain married to this day. Taxpayer wife had ownership of the house at 27 Evelyn Road. This house was available for them whenever they visited NZ. It is 27 Evelyn Road that the Commissioner says was taxpayers permanent place of abode in New Zealand for the tax years 2005 to 2009.

7. At para [14] On the basis of Customs’ arrival and departure records the TRA determined taxpayer was in New Zealand over those years for (a) over six weeks in the 2005 year; (b) two months during the 2006 year; (c) five months during the 2007 year; (d) four months during the 2008 year; and (e) four months during the 2009 year

8. Taxpayer filed tax returns until and including the 2004 tax year, he only returned approximately half of his salary in New Zealand. For the income years ended 31 March 2005 and 31 March 2006 taxpayer filed nil income tax returns. In the year ended 31 March 2007 taxpayer filed non-resident tax return disclosing a small loss for the year. In the years ended 31 March 2008 and 31 March 2009 he filed non-resident tax returns.

Legal Issue

Was 27 Evelyn Road a permanent place of abode in New Zealand for Mr van Uden in the 2005 to 2009 tax years?

Law

The law — permanent place of abode. Section OE1 of ITA 1994

Notwithstanding any other provision of this section, a person, other than a company, is resident in New Zealand within the meaning of this Act if that person has a permanent place of abode in New Zealand, whether or not that person also has a permanent place of abode outside New Zealand.

Taxpayer Arguments

1. At [28] taxpayer said “he did not have any connections to 27 Evelyn Road that went beyond the connections any sojourner in New Zealand would have to a place where they happened to stay habitually whilst in New Zealand. They had it in mind to set up base somewhere in Europe Holland in particular

2. His stay at 27 Evelyn Road was merely accidental. It was mainly to look after trust properties (about 4 rentals) and to look after the elderly relatives in NZ.

3. 27 Evelyn Road was not owned by him personally, it was held under ownership of a family trust.

Analysis

1. At [32] “As to the word abode itself, the Court adopted the dictionary definition of “habitual residence, house or home or place in which the person stays, remains or dwells”

2. Para [45] to [52] provides analysis of integrated factual assessment established in Diamond case (Commissioner of Inland Revenue v Diamond [2015] NZCA 613)

Continuity or otherwise of the taxpayer’s presence in New Zealand and in the dwelling

Taxpayer spent approximately eight months a year at sea. However, when he was not on the ship or travelling, he would return to New Zealand. And when he did return to New Zealand in the relevant tax years, and was not visiting family, he lived at 27 Evelyn Road.

The duration of that presence

27 Evelyn Road has been available to and used by taxpayer for approximately 12 years 1998 to June 2010. In June 2010 this place for formally let. However, up until June 2010 this place was available to taxpayer.

The durability of the taxpayer’s association with the particular place

Credit card statements shows he incurred household expenditure. He paid for a SKY TV account. The property is also a registered address for the bills, bank accounts, insurance policies and investments.

The closeness or otherwise of the taxpayer’s connection with the dwelling

“A taxpayer does not need to own a property in his or her own name to have a permanent place of abode there.” Whenever taxpayer returned to New Zealand, he would stay at 27 Evelyn Road. In a loan application 27 Evelyn Road is referred to as their home.

Permanent not temporary place of abode

27 Evelyn Road was always available to taxpayer when he returned to New Zealand.

Other permanent places of abode

Taxpayer has no other PPOA. Thus, this argument has no weight.

Summary

At [52] court stated, “We therefore uphold the conclusion reached by the TRA and the High Court that, during the tax years in dispute, Mr van Uden had a permanent place of abode in New Zealand.”

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