[suebeenz]

I was reading in the 'guide to applying for residence in new zealand',

Tax Exemption

From 1 April 2006 most types of individual income derived from overseas are temporarily exempt from tax in New Zealand if you fulfil certain conditions. The temporary tax exemption is available to new migrants and return New Zealanders who have not been resident for tax purposes in New Zealand for at least 10 years. See www.ird.govt.nz for further information.


Has anyone looked into this? On that note, can anyone recommend a good tax lawyer here?

I found a document on ird's website - ir292-2006.pdf, which goes on,

The temporary tax exemption for foreign income is for four calendar years (up to 49 months).


Types of foreign income that would be exempt if you're elligible, are things like stock options, dividens, interest, overseas employment income, sale of home or property.

If you're not considered a NZ tax resident, then you don't need to worry about all this i suppose.

Curious to hear how everyone else handled this stuff. Thanks in advance!

Sue

[Angela]

we came to nz in june 05 we were taxed here for the whole year and also other members of our family we all went to the tax office in nz and were able to claim tax back so watch your tax you have paid if you come to nz part way through the year we also claimed our tax from uk for leaving the country so we all had tax back from both countries

[Trigirl]

hi sue

you don't need to do anthing to get your exemption - it just means you don' t have to declare any overseas income in those 4 years. it doesn't apply to earned income (eg if you were still working and being paid in the uk) but it does apply to interest, rental income etc.

[suebeenz]

I'm afraid I'm still a bit confused as I'm getting somewhat conflicting information (or I'm just misinterpreting).

What if I work for a foreign company for the full year. The first half of the year I work outside of NZ. The second half, i live inside NZ. I pay overseas taxes for the whole year, since that country require it. Come tax time, because of double-tax agreements, I should never have to pay tax on the same income twice.

So having said that, let me break it down more to make sure that I've got it. Say that my yearly income was 50K. Since I made 50% of that while out of NZ, NZ would only really consider 50% of my income (25K) as taxable. Let's say that NZ tax rate is 35%. Assuming that I've paid 20% overseas tax on the whole 50K, then NZ would want 35-20 = 15% of 25K.

That sound about right? And because of Overseas Tax exemption, any money that I make from overseas rentals, home sales, stock dividends etc are NZ tax free.

Btw, does NZ have simple software to help with filing tax returns?

Really appreciate your feedback here! :)

[diforsyth]

Without knowing the other country you are working in it's impossible to advise.
I suggest that NZ will expect tax on earnings whilst you are resident in NZ i.e half of your yearly income at the local rate - they will not take into consideration payments elsewhere because that is your concern and not theirs. You would need to seek a tax rebate from the foreign country.
Income from overseas rentals, home sales, stock dividends etc will be exempt from tax for the first 4 years.
David.

[Trigirl]

they will not take into consideration payments elsewhere because that is your concern and not theirs

actually i wouldn't agree with this. you are charged nz tax on your whole income and then allowed to set against that a "tax credit" for anything already paid overseas.

so in the situation above:

you earn $50k, of which you earn $25k in nz and $25k overseas. you are resident in nz so you pay nz tax on the whole $50k. lets assume 30% - you pay $15k. you also pay overseas tax on the bit earned overseas (you aren't resident there so you wouldn't have to pay overseas tax on your whole income) so you pay 20% on $25k - $5k.

you claim that $5k back when you do your nz tax return - there is a specific section for overseas tax credit.

[suebeenz]

you earn $50k, of which you earn $25k in nz and $25k overseas. you are resident in nz so you pay nz tax on the whole $50k. lets assume 30% - you pay $15k. you also pay overseas tax on the bit earned overseas (you aren't resident there so you wouldn't have to pay overseas tax on your whole income) so you pay 20% on $25k - $5k.

you claim that $5k back when you do your nz tax return - there is a specific section for overseas tax credit.

Yeah paying NZ tax on the whole $50K is what I'm most unsure about. I was looking at this IRD pdf (http://www.ird.govt.nz/resources/file/eb3fc848ae7b9d2/ir292-2006.pdf) and in the "the year you become a tax resident" section it says


In your first New Zealand individual tax return as a tax resident you must include your worldwide income from all sources from the date you arrived in New Zealand.


That seems to contradict what you're saying above. The way that reads, sounds like they would only want to tax $25K earnings (and only get credits for overseas tax paid on that portion). Do you have first hand experience with this situation? I have a hard time reading between the lines (or on the lines for that matter) with these types of documents. :uhoh

Thank you!

[diforsyth]

I think there is confusion and assumptions being made on when you actually become resident in NZ and what you will earn before and after that point.
David.

[Trigirl]

oh i see what you mean. i didn't realise you were talking about the year in which you arrived. i thought you meant a normal year in which you were resident in nz the whole way through.

[suebeenz]

Sorry guys I wasn't more clear. Yeah new to NZ this year. So sounds like in that case, they'd only tax (and credit) on salary since landing here.

For future years though, they'll tax on the full year. This next part is where diforsyth, and trigirl disagree? Trigirl you were saying that I'd have to pay tax on the full yearly amount, and later I can apply for a tax credit for overseas tax already paid on that money? (I can't just send in the difference when I file NZ taxes?)

And Diforsyth, assuming double tax agreement between the two countries, do you agree with what's written above?

Thanks so much for your patiences you guys :D

[diforsyth]

I was only considering your first part year as an NZ resident and have not looked into your type of scenario, sorry.

David.