Some of our clients live and/or work overseas, and have asked us about non-residency status with regards to tax.
The IRD has Double Taxation Agreements (DTAs) with a number of countries, meaning that tax paid in one country is counted when filing tax returns in the other country, so that you don't get taxed twice.
The IRD explains it this way: "You may be a tax resident in both New Zealand and another country or territory. This means that you are a resident in two countries or territories and subject to the tax laws of each. If both countries or territories tax their residents on worldwide income you could be taxed twice on the same income. Double tax agreements (DTAs) have been negotiated between New Zealand and many other countries or territories to decide which country or territory has the first or sole right to tax specific types of income."
Click here to see the current list of countries with whom NZ has a DTA. Note that the arrangements vary from country to country, so you need to check out the specifics.
Non-residency means that you are taxed as a non-resident on any income derived here in NZ. These rates are significantly lower than normal tax rates, e.g. the non-resident tax rate for the United Kingdom is 10-15%. See here for details
Working out if you are a resident or not for taxation purposes
It may not be as straightforward as you think (I'm not trying to rain on the parade here!!). Here's what the IRD says:
For tax purposes you are a non-resident if you are away from New Zealand for more than 325 days in any 12-month period, and do not have an enduring relationship with New Zealand.
So, how do you know if you have an enduring relationship with New Zealand? Happily, IRD has published a guide to help you work it out. As with virtually everything, this is self-assessed and honesty-based. Make sure that your conclusion is that of the hypothetical "reasonable person." See also this page at the IRD website, which contains a common example scenario, wherein someone lives in the UK but owns property in NZ
Let's say that you work out that you are not tax-resident in New Zealand, and you own rental property here:
Other helpful links
What is my personal tax residency?
What income is taxable in New Zealand?
New Zealand tax residents with overseas interests
Top 10 facts on international tax
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