Latest News [index] International tax misconceptions
As we become more globally mobile it is extremely important to appreciate and recognise that tax liabilities can arise in more than one tax jurisdiction. The following list of commonly misunderstood tax facts relating to individuals has been prepared by the Inland Revenue Department (see Agents Answers issue 132 February 2011 http://www.ird.govt.nz/aboutir/newsletters/agents-answers/2011/agents-answers-issue-132-02-11.html#15):
- New Zealand residents aren't just taxed on the income they earn in New Zealand, they're also taxed on their worldwide income.
- If you leave the country but maintain a permanent place of abode here, you're still a New Zealand resident for tax purposes.
- Foreign income including investments (even if deposited in an offshore account or left on a foreign credit card) is taxable in New Zealand even if it's not repatriated to New Zealand.
- Equally, the fact that withholding tax may have been deducted on foreign income doesn't mean that this income is no longer taxable in New Zealand.
- A foreign tax credit may be available but only where the tax involved is not subsequently refunded (even in a later income year), it's substantially similar to income tax and can't exceed the tax otherwise payable on the underlying income in New Zealand.
- Not all overseas pension payments are tax-free, certain ones may be fully taxable in New Zealand.
- Special taxing regimes (controlled foreign company and foreign investment fund rules) apply to gains on certain foreign shareholdings, retirement schemes and life insurance investments.
- Additional disclosures are required in respect of controlled foreign companies and foreign investment funds.
- Allowances that may be treated as tax-free in other countries (for example, living-away-from-home allowances) are generally fully taxable in New Zealand.
- The temporary tax exemption on foreign income for transitional residents expires after 48 months and there's no entitlement to Working for Families Tax Credits during the period of the exemption.
If you have concerns about your New Zealand tax liabilities please contact a member of the Ayres Legal team.