[Phil & Ali Smith]

Advice / knowledge needed.

We are expecting to have our telephone interview any day now, and hopefully PR shortly after that.
We sold our house last August and have been renting in UK since then.
We have our business (joinery) on the market, but haven't sold.
I desparately want to move to NZ as soon as possible.

The question is, can it work ?
Has anybody on the forum done this ?

Phil's managed the business for years, but his right-hand man has all the knowledge to continue the operation. I'm not so much worried about the actual continuity of the business, more about how complicated it will be sorting out financial stuff.

Does the NZ 4 year tax exemption include earnings on businesses outside NZ.
We both want to work in NZ, so how do you know where you are resident for tax purposes.
It's all so confusing :uhoh

Our own accountants are not that helpful.
Any advise on who to go to for helpful information, re; websites or financial advisers would be great.

In anticipation, Ali

[gil]

Hi guys,
Not being a financial whizz meself, have you looked at this?
http://www.ird.govt.nz/
Also, you might PM a couple of savvy financial people on this forum? I will PM you details of our FA, based in Chch, but comes up to Akl too.

Good luck,

Gil

[Pip]

Gil, would you mind pm'ing me the details of your financial advisor in C.church(assuming that you are happy with them!), its something that we've been meaning to get round to and I don't really want to just pick someone out of the book, so a recommendation would be really helpful..

thanks



Pip

[eternalkiwi]

Hi Ali,

Exempt types of foreign income include many types of investment income, income from foreign trusts, rental income derived offshore, foreign dividends, interest and royalties, gains on sale of property derived offshore, Offshore business income (that is not related to the performance of services).

When your tax exemption ends after four years (up to 49 months), you must declare all foreign income on your annual income tax return (IR3 for individuals).

These types of foreign income are not tax exempt in New Zealand:
• Employment income from overseas employment performed while living in New Zealand
• Business income relating to services performed offshore.

Tax Residency
You will be a NZ resident if you are in NZ for more than 325 days in a 12-month period.

Shawn

[uk_munros]

Hi Ali,


Tax Residency
You will be a NZ resident if you are in NZ for more than 325 days in a 12-month period.

Shawn

I thought that you become tax resident if you spend more than 183 days in NZ in any 12 month period (certainly that is the case if you are a kiwi returning to NZ). Most importantly note that it is in any 12 month period, not a tax year and so if you go out to NZ for a quick visit in April and then emigrate in Aug staying for the next 12 months you will be judged to be tax resident from APRIL when you first arrived.

You need to get someone in the UK who knows about how to declare yourself non-resident for tax here (If you are a UK national there are rules about how long you need to spend outside of the UK before you are exempt from taxes such as Capital Gains and Inheritence Tax here in the UK - think CGT is 5 years before exemption).

Then you need someone in NZ to advise you on what income/assets NZ IRD is going to be wanting to tax you on as an immigrant. In general NZ IRD taxes on Worldwide income but there are recipricol treaties between UK and NZ so you can credit tax paid in UK against tax due in NZ on the same income.

It gets very complicated.

As for running a business from NZ. What type of business is it? Internet based?

GM

[eternalkiwi]

The 325 day rule is what IRD state on their website as the residency test. I have since checked their residency guide-book that states you need to meet the 183 day test. Of the two I would be more likely to believe the IRD guide book rather than their website.

According to the UK HMRC website, if you are working abroad you will be non-resident if your absence from the UK and your employment abroad both last for at least a whole tax year and during your absence any visits you make to the UK

- total less than 183 days in any tax year, and
- average less than 91 days a tax year. (Over a maximum period of 4 years).

If you go abroad permanently, you will be treated as remaining resident and ordinarily resident if your visits to the UK average 91 days or more a year.

Any days spent in the UK because of exceptional circumstances beyond your control, for example the illness of yourself or your immediate family, are not normally counted for the purposes of averaging your visits.

Shawn

[uk_munros]

Any days spent in the UK because of exceptional circumstances beyond your control, for example the illness of yourself or your immediate family, are not normally counted for the purposes of averaging your visits.

Shawn

The day u arrive and the day you leave are also not counted! Every little bit helps!

[Phil & Ali Smith]

I'd better explain.

We both intend to live in NZ permanently. However, we will still own the UK business (it's a manufacturing joinery business).
My OH intends to leave it to his foreman/manager (of 30 years) to continue the day to day management, and will only return to the UK 2/3 times a year (perhaps 40 days total, all being well). Being manufacturing & joinery in particular it's not hugely profitable, but it should provide a small income. As I've said, we both intend to work when we get to NZ.

So eternalkiwi is this:-

Offshore business income (that is not related to the performance of services).
or
• Business income relating to services performed offshore. :confused:

Gil, thanks for the PM,

uk munros, it's definitely not an internet based business.

Thanks for your replies,

Ali

[eternalkiwi]

Hello Ali,

As your business is Joinery related, I would expect any income you receive would meet the criteria of being 'Offshore business income (that is not related to the performance of services)', rather than 'Business income relating to services performed offshore'.

Business income relating to services performed offshore, as I understand it, would include businesses like accounting, consulting, and possibly Graphic or Database design.

Shawn

[Phil & Ali Smith]

Thanks Shawn,

So does that mean that if we are residents in NZ, we will be taxed in NZ, therefore any profits from the UK business will be tax exempt for 48 months ?
But any work we do in NZ, we will be taxed on as NZ residents.

Or isn't it quite as simple as that ?

Ali

[eternalkiwi]

Hi Ali,

Yes your understanding is correct.
Your UK income would be exempt (i.e not assessable for Tax), which will leave your NZ income as taxable.

Once the 48 month exemption has expired you will be taxed on your worldwide income.

Shawn

[Phil & Ali Smith]

thanks once again Shawn,

That sounds much better already, the new 48 month exemption thingy has really done us a favour (it would seem !). Now I could really start to get excited if it wasn't for the problems we've just encountered with our PR application, (medicals in particular). But I'll post that on another thread !

Ali

[Super_BQ]

I don't really the benefit with the 4 year exemption on overseas income. After all your UK business will have to pay income taxes at the UK end. All this 4 year NZ exemption does is avoids any possibility of double taxing it at NZ's end. Then after that, you're expected to declare that UK business income on the IRD's tax return. (comes off as a foreign tax credit) - while the business continues to pay taxes in the UK.

However, if the issue is receiving dividends from that company. It may pose a benefit for 4 years.

I would be curious of how many that would come to NZ specifically to take advantage of this 4 year tax exemption status AND THEN after the 4 years, move back to the other country permanently? Time will tell...

[Paul]

Firstly my thoughts would be to try and sell the business before you move - is the manager/foreman not interested in buying out over a couple of years for instance?
You would almost certainly by the sounds of it benefit from business asset taper relief on the sale whilst you are still UK resident and so would pay very low rate of tax on the sale. You haven't got the worry or additional cost of travelling back when things go wrong. Or even the worry about trusting someone from 12k miles away
Also if you have a permanent place of business in the UK this may cloud the non residency issue from a UK perspective

The possible plus sides I can see to keeping the business would that you will still get your personal allowance so you could earn £5k each before you started paying tax - so structure it right (ie partnership or limited company possibly) and you could have a £10k tax free income from the business with no tax for 4 years the NZ end if my understanding of the previous posts is correct?

If it was me I would be looking to off load the business before I went though without a shadow of doubt - its hard enough running a business when you are here yet alone when you are so far away

Best of luck!