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Overseas Income

Hamish Pryde • November 23, 2011

Overseas Income

If you receive overseas income and are a tax resident in New Zealand, you shall be taxed in New Zealand on your worldwide income.

Tax Residence

In New Zealand, a person's liability for income tax depends on the person's residence status.  The concept of residence for tax purposes is based mainly on the "permanent place of abode" test or on a quantitative test.

The rules for determining an individual's residence for tax purposes are:

  •   The permanent place of abode test :  A person is deemed to be a New Zealand resident if that person has a permanent place of abode here, whether or not that person also has a permanent place of abode overseas.
  •   The 183-day test :  A person who is present in New Zealand for more than 183 days in aggregate in any 12 month period is deemed to be a resident from the first day of presence.  (Even if the person concerned has a permanent place of abode overseas, that person may still be regarded as a New Zealand resident.)
  •   The 325-day test :  To cease New Zealand residency, a person must be absent from New Zealand for a period or periods exceeding in aggregate 325 days in any 12 month period.   Non-residence commences from the first day of absence.

The permanent place of abode test takes precedence over all the other provisions.

Consequently, an individual whose permanent place of abode is in New Zealand remains a tax resident, despite an absence from New Zealand of more than 325 days in a 12 month period.   However, when determining residency, both the permanent place of abode test and the 183-day test must be applied.

Factors that, therefore, require consideration in determining whether there is a permanent place of abode in New Zealand are:

  •   The length of time spent in New Zealand.
  •   Accommodation arrangements — whether a house is rented or purchased, and whether a house is retained in New Zealand while overseas.
  •   Employment history.
  •   Whether the taxpayer's family has accompanied him or her to or from New Zealand.
  •   Financial ties made or retained in New Zealand — bank accounts, investments, superannuation arrangements, etc.

  •   Whether annual leave is taken in New Zealand or the overseas country.

Normally all and not just some of these factors are examined to determine an individual's permanent place of abode.

 

Double Tax Agreement

New Zealand has double tax agreements with a number of countries.  If a double tax agreement exists, this means that any tax deducted from earnings in the overseas country is allowed as a tax credit for taxation due in New Zealand.  The tax credit is limited however to the lesser of the tax deducted overseas or the equivalent taxation due on this income in New Zealand.

Hamish Pryde - Chartered Accountant and Business Advisor -  October 2011

By Hamish Pryde September 11, 2024
Paper is everywhere. We spend a lot of time and money moving paperwork around. But with today’s technology it is now possible to get rid of paper entirely. Digital documents are simpler, easier to store and send, more searchable and permanent. How long does it take to post a document to somebody via the ole stamp and envelope method, that is snail mail? It is more efficient and timelier to email the document. How many times do you go to print a document at home and find that your printer has run out of ink? Why do we still hold onto printing paper documents? Sometimes it’s just because that’s what we’ve always done and let’s face it change can be difficult at first. Paper alone is cheap. But when you start paying for printers, toner, servicing and maintenance, paper starts to look more expensive. Let alone the storage cost. Paper tax records for seven years can be quite a few boxes of paper. We have embraced some paperless technology as part of a modern business practice. This includes digital signatures, digital collaboration, paperless minutes of business improvement and coaching meetings, electronic work papers and my new digital notebook which I am enjoying. We send questionnaires via email to you to gather vital information to enable us to prepare your annual financial statements. This is a PDF document. Instead of printing the questionnaires you could save the document down into a folder of your choice then edit the PDF document and return to us. How do you edit a PDF document you ask? Once you have opened the document the Adobe online editor lets you do some things for free. The online editor works in any web browser and lets you add text, sticky notes and highlights. Click on the fill & sign button to the right of the document, then in the top toolbar click Iab text button. You can add text directly on the PDF document. Have a try next time you have a PDF document open. Xero and Farm Focus users can attach invoices directly to the transaction loaded into Xero. Then if you are looking at the rates expense in the profit and loss account or farm working account, you can drill down into the rates code and see the transactions. Then attached to each transaction is the rates invoice if you use this great functionality. All invoices can now be stored in the cloud. So why paperless? Productivity - electronic documents are instantly and simultaneously available to everyone who needs them. Reduce waiting times with less risk of loss or damage. Cost savings - you will save money on printing, postage and associated costs. You could pay less rent because you won’t need all that space for your files. Security - electronic documents are more secure than printed ones. Digital records can be password protected and rendered unreadable through encryption. Printed documents are only as secure as their proximity to a copy machine. Reduced Clutter - paperwork on desks and shelves are not only untidy it’s inefficient too. The organisation of digital files is simpler and your office will look much neater. That will help you clear your mind to focus on your business. Environmentally friendly - less printing means fewer trees cut down for pulp and less energy used to make and transport paper. Disaster recovery - if there is a fire or flood, recovery from the backup is much easier with digital storage them with paper. There are great help articles available in Xero or Farm Focus if you are not attaching invoices to payments already. To find out how click on the links below: If you would like to explore ways you can go paperless we can help.
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