Temporary tax exemption for foreign income

Posted on December 5, 2016May 7, 2018 by admin

Since 1 April 2006, people arriving to live in New Zealand may qualify for a temporary tax exemption on most types of their foreign income. Find out if you qualify below.

Posted in Money and Costs

Temporary tax exemption for foreign income

Since 1 April 2006, people arriving to live in New Zealand may qualify for a temporary tax exemption on most types of their foreign income.

Who is eligible for this temporary exemption?

This temporary tax exemption is available to people who have arrived in New Zealand on or after 1 April 2006 and are new migrants or returning New Zealanders who have not been resident for tax purposes in New Zealand for at least 10 years prior to their arrival in New Zealand.

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The exemption can only be granted once in a lifetime. For further advice on the foreign income tax rules, please feel free to contact the experts.

The exemption

The temporary tax exemption for foreign income is for four calendar years (up to 49 months). The exemption starts on the first calendar day of the month you arrive in New Zealand and is valid until the last calendar day of that month four years later.

For example, if you were to arrive in New Zealand on 22 April 2011 and have one or more types of foreign income that are temporarily exempt for taxes in New Zealand (see list below), you are eligible for the exemption counting from 1 April 2011 until 30 April 2015, which effectively is 49 months.

The tax exemption is automatically granted if you qualify.

Types of foreign income temporarily exempt from tax in New Zealand:

Dividends
Interest
Bonuses from a previous job overseas even if received after arriving in New Zealand
Controlled foreign company (CFC) income – under New Zealand’s CFC rules
Foreign Investment Fund (FIF) income, including foreign superannuation – under New Zealand’s FIF rules
Non-resident withholding tax on foreign mortgages
Approved issuer levy on foreign mortgages
Taxation arising from employee share options
Accrual income from foreign financial arrangements
Certain trust income
Rental income derived offshore
Royalties derived offshore
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:

Income derived from overseas employment performed while receiving the exemption
Business income relating to services performed offshore

If you have any of these types of income, you must declare them on your annual income tax return (IR3 for individuals) from the date of your arrival in New Zealand.

Confirm your eligibility for the temporary tax exemption

The tax exemption is automatically granted if you qualify. You do not have to contact the New Zealand Inland Revenue Department (IRD) with your information, but if you would like it to, the IRD will confirm your eligibility for the temporary tax exemption based on the following information you provide:

Your individual IRD number
If you don’t have an individual IRD number, you must get one before contacting the IRD regarding your overseas income
Your arrival date in New Zealand (date you arrive/d in New Zealand to live)
Your New Zealand address

How to contact the IRD

You can contact the IRD in one of four ways:

You can use the online general enquiry form on the IRD website
You can register for an online IRD services account that will allow you to send and receive secure mail, etc. It will take approximately 10 days to receive your password by traditional mail once you have registered on the IRD website
Call the IRD free within New Zealand on 0800 227 774 or, if you are outside New Zealand, call the IRD on +64 4 801 9973

Send a letter to the processing centre nearest to you.