After speaking about expat taxes in numerous countries, including Thailand, South Korea and Japan, Germany, Singapore, France the Philippines and Switzerland, this article will speak about New Zealand.
Alongside looking at income taxes for individuals, we will also focus on other forms of tax, including for firms and on capital gains taxes.
We also can’t focus on things from the perspective of every nationality, because some countries do apply taxes by citizenship. This is the case for Americans and a few other nationalities.
Whilst this article shouldn’t be considered as tax advice, it is correct as far as we are aware at the time of writing.
A quick note before we start
If you are looking for portable expat tailored investment solutions, which is what we specialise in, you can contact me on this form or via WhatsApp on the screen.
Often it is far more tax-efficient to invest overseas, in a portable structure, as an expat, as opposed to sending money home.
Table of Contents
New Zealand is truly one of the most scenic and photogenic places on earth. A small island nation with a population of just over 4.5 million, New Zealand is made up of two main land masses (North Island and South Island) and a number of smaller islands, including Stewart Island, located in the southwestern Pacific. The two main islands are separated by a 22 km stretch of water called the Cook Strait.
New Zealand is located about 1,500 kilometers east of Australia and about 1,000 kilometers from the Pacific Islands. Due to its relative remoteness and lack of water, New Zealand was one of the last countries to be found and settled.
The country is made up of some of the world’s most scenic landscapes, from vast mountain ranges, smoking volcanoes to sweeping coastlines. It is a natural playground for thrill seekers and adventure seekers, as well as those who just want to visit the culture and scenery.
Although the land areas of the North and South Islands are similar, roughly two-thirds of the population lives on the North Island and the rest on the South Island.
New Zealand’s free trade economy is dependent on international trade, with the main export industries being agriculture, horticulture, fishing, forestry and mining. The main export partners are New Zealand’s transnational neighbors, Australia, as well as the US, UK and Japan. The markets of China and Asia are becoming more and more export destinations.
Tourism also contributes significantly to and attracts travelers from all countries, with Australians being the most frequent visitors. Watch a video about popular destinations in New Zealand.
The majority of New Zealand’s population is of European descent, while Auckland, New Zealand’s largest city, is the most ethnically diverse in the country and has the largest Polynesian population of any city in the world.
Auckland has a population of about one third (over 1.3 million), followed by the capital Wellington and the South Island city of Christchurch (about 400,000 each). In 15th place is Gisborne with a population of about 35,000.
New Zealand is a melting pot of different cultures and nationalities, and the entire nation feels like multicultural. The population of New Zealand is mainly composed of people of European descent, but the current country is attracting an increasing number of expatriates from South Asian countries. No matter where you are from, living in New Zealand will give you the opportunity to meet people with similar backgrounds.
New Zealand is an extremely safe and clean country, and its low cost of living and favorable tax systems make it often referred to as one of the best destinations in the world for expats.
New Zealand and the USA have a lot in common, like great scenery, fast food, and the English language. People who have moved to New Zealand from the USA say that Kiwis are relaxed, friendly, and easy to get along with. Many US expats find that New Zealand has a quieter, gentler pace of life and great work/life balance.
Now let’s see does this country provide its expats with suitable tax system, and discuss each type of taxation, rates and more.
New Zealand tax system
New Zealand’s tax system is easy to use compared to many other countries. The New Zealand government relies on taxes to fund services that benefit all New Zealanders. All taxes are paid to Inland Revenue, the government’s tax department, also known as the IRD.
This article will help you learn about New Zealand tax system and have an imagination on how it works. Individuals and businesses in New Zealand must pay tax on their income. The government also levies sales tax on certain goods and services.
- Income tax – the tax on what you earn – is commonly known as Pay-As-You-Earn or PAYE.
- Goods and Services Tax – the tax on the things you buy – is commonly known as the GST.
There are other types of taxes as well. Your employer will withhold PAYE tax from your salary or wages before it pays you and pays it to Inland Revenue on your behalf.
Inland Revenue determines the amount of personal tax that you must pay automatically. But some people have to file an Individual Tax Return (IR3) in order to declare their income.
IR3 is a statement of how much income you earned during the tax year (April 1 to March 31). This includes money received from various sources such as wages, overseas income, retirement benefits, investments and rental income.
Taxation of worldwide income depends on your resident status.
- Resident – taxed on global income minus foreign tax deductions to protect residents from double taxation.
- Non-resident – taxed only on income derived from New Zealand; income from foreign sources is tax-free
- Temporary Resident – Taxed on New Zealand’s global and personal income, excluding the 48-month exemption period.
Who is considered a resident of New Zealand?
Only New Zealand residents have to pay income taxes, let’s see what criteria are characteristic to them. Personal tax stay in the country of New Zealand is defined as follows:
- The person is physically present in the country for more than 183 days in any period of twelve months. These days don’t have to be consistent.
- The person permanently resides in the country. A house is considered a permanent residence if it is owned and used by a person. It is not enough just to have a home for living. The person also needs to consider relationships (both personal and business), work situation, and family location. New Zealand tax authorities also take into account the taxpayer’s intention to reside in the country.
- Both newcomers to the country and people who have been absent for more than 10 years have a transitional residence permit. The exemption begins on the 1st day the person purchases a home, or exceeds 183 days in the country, and applies for 48 full months.
If you are a US citizen or permanent resident, you are required to file US tax returns with the IRS annually, regardless of the country in which you reside.
In addition to the regular income tax return, you could also be required to file an informational return on your assets held in foreign bank accounts with Foreign Bank and Other Account Reporting (FBAR) Form 114, in addition to Form 8938 Statement of Specified Foreign Financial Assets.
Although the United States is one of the few governments that taxes the international income of its citizens and permanent residents abroad, it has special provisions to help protect them from double taxation, including:
- The Overseas Income Exclusion allows you to reduce your taxable income from U.S. expatriate taxes by the first $ 105,900 in 2019 that you earned as a result of your work as a resident of another country ($ 107,600 in 2020).
- A foreign tax credit, which allows you to offset taxes paid by you in the host country from your US dollar per dollar foreigners tax, and
- Exclusion of foreign housing, which allows you to exclude certain household expenses arising from living abroad.
With the right planning and good tax preparation, you can take advantage of these and other strategies to minimize or even eliminate taxes on US expats. Note that even if you are not sure if you will have to pay any US income taxes, you will most likely still have to file a tax return.
US – New Zealand tax treaty
The US-New Zealand tax treaty is useful in situations where an expat is unsure whether to pay taxes on their New Zealand tax return or on the tax return of US expats. The agreement is relatively simple, but if you have any questions regarding the tax agreement, you should seek advice on taxation of expats.
New Zealand income tax rates
Internal Revenue Department tax rates are progressive for all income assessed by the New Zealand tax authorities.
Earnings in New Zealand Dollars (NZD) – National Income Tax Rate (%)
- 0-14,000 10.5%
- 14,001-48,000 17.5%
- 48,001-70,000 30%
- 70,000 and above 33%
Please note that the non-resident withholding tax is a flat rate of 15%, which may be reduced due to the US Double Taxation Treaty with New Zealand.
The tax rate in New Zealand is the same as in the United States. Depending on your income level, you are not particularly at risk of paying high taxes in the United States because of the low taxes in New Zealand.
The rates are based on your total income for the tax year. Your income may include:
- work and income allowance
- planned payments
- interest from a bank account or investment
- self-employment income
- money from renting property
- foreign income.
Some income is taxed before payment. This includes salaries, wages, work and income benefits, regular payments, and interest. The amount of tax withheld by your employer or payer depends on the tax code and the income information you provided to them.
You may receive a refund or tax payment at the end of the tax year if you were taxed at the wrong rate during the year. It is important to use the correct tax code.
Other income is not taxed until paid. This includes income from self-employment or rental property, as well as some income overseas. You pay tax on this income at the end of the tax year. The amount of tax you pay depends on your total income for the tax year.
Social Security in New Zealand
New Zealand has a three-pillar pension system. The first pillar includes the New Zealand Old Age Pension or NZS (Social Security), which is a non-contributory government pension. The NZS’s goal is to provide social security for all residents who meet the residency requirements at age 65.
The second component includes in-service retirement programs and the KiwiSaver scheme. The KiwiSaver Scheme is a voluntary work-based program whose main purpose is to supplement and increase general retirement savings. Contributions to the KiwiSaver scheme are voluntary for employees and employers. In addition to paying recurring fees from the account, the government is making an advance to KiwiSaver of NZ $ 1,000.
The third component consists of professional schemes in the private sectors, which are provided through registered or unregistered pension schemes. Professional schemes are provided on a stand-alone basis or as part of a main trust.
There is no summation agreement, so this could be one area where Americans living in New Zealand may be subject to double taxation. Expats from the United States can obtain more information about New Zealand’s system from the United States Social Security Administration.
When do you have to pay taxes in New Zealand?
The annual tax year in a country in New Zealand is different from the tax year in the United States. It starts on April 1st and ends on March 31st.
This difference means that a person must be changed accordingly on a U.S. tax return, even if they are also filing New Zealand taxes in their tax year. Refunds must be submitted by July 7, but an extension until March 31 is possible if the person is registered with one of the tax authorities.
Most income is taxed as it is received, but tax returns must be filed unless your income is taxed below NZ $ 200. You will also need to file a tax return if there is dividend, interest or other income from work.
Tax payments are made in three installments – August 28, January 15 and May 7. These payments are required if the tax liability is at least NZ $ 2,500.
And this may come as a surprise, but many people in New Zealand are not required to file tax returns at the end of the tax year at all. If your income is related to salary, wages, benefits or taxable pensions, your tax will be automatically PAYE deducted (pay as you earn). This means that when you receive your weekly or monthly salary, your tax has already been deducted from it.
You will only need to file an Individual Income Tax Return (IR3) if you received income other than wages, interest, dividends, and / or taxable Maori distributions of authority. Other income includes:
- Rental income
- Income from the sale of taxable real estate
- Self-employment or business income
- Overseas income
- Income from work for cash or payments “from under the table”
- Income from an illegal enterprise
- Planned payments over $ 200 (previously withheld payments)
- Income from inheritance, trust or partnership
- Distribution of income / loss from the viewed company (LTC)
- More than $ 200 in foreign interest and dividends, on which tax has been withheld
- Tax-free foreign interest and dividends
- Non-withholding PAYE income, such as an employee shareholder’s salary or a claim earned under a taxable loss of earnings policy.
- Distributed income from a portfolio investment subject to zero tax
- Received portable seniority or veteran’s pension (note that due to this late change, the requirement to file an IR3 return is not shown in the 2010 IR3 Returns Guide).
You also need to file an Individual Tax Return (IR3) if you:
- Have losses requiring a claim or carried forward from the previous year
- Whether excess impairment charges have been carried forward from the previous year
- Left or arrived in New Zealand halfway through the year
- Submit a declaration for the deceased before the day of death (if there is a requirement to submit a declaration for the year of income)
- Have been declared bankrupt halfway through the year (if there is a requirement to file an income tax return)
- Changed the balance date during the year
- Distributed income earned from a portfolio investment that was taxed at a rate below your correct rate.
- Select to include dividends received from a portfolio company listed on the New Zealand Stock Exchange to require imputation.
Here was an in-depth New Zealand tax system description. A lot of people do not fully get why they have to pay taxes, even if they are expats, now let’s talk about some very important points of paying taxes.
The taxes that all employees are required to pay monthly, quarterly and annually often seem a burden, but it is better to pay properly than to have tax arrears that haunt us.
Taxes have existed for thousands of years and will remain forever as long as we all have civilization. It is true that paying taxes is a burden that we all must accept, but it is also pertinent to consider that tax and other forms of reimbursement imposed by the state play a critical role in human progress. Therefore, it would only make sense to fulfill the obligation to pay taxes.
There are so many different types of taxes, but some of the most common are value added tax, income tax, tax arrears, and more. Many people wonder why they should pay taxes, while others just don’t care what taxes they get in return.
Social security package
Social security and welfare are some of the greatest benefits enjoyed by the homeless, the homeless, and those in need of less privilege. Taxes have been used for many years to fund social security packages that are important to humanity, especially those in need.
Social security packages are essential in a normal society and without taxes it would be impossible to provide such services.
The government has used tax revenues over the years to build health services and other institutions that benefit humanity, thus laying a better foundation for the next generation. Thus, tax revenues are essential for improving the standard of living in society.
The tax, regardless of its name, is another source of the state’s existence. No government can exist without taxes. Tax money is essential to fund government programs that are necessary to keep the government alive. There is no government in the world today that does not collect taxes in one way or another, and the reason is to support itself.
Since taxes are the source of the nation’s life, we must be patriotic about this source of life for the nation to continue to function. However, taxes are needed to help the government protect us, build better roads and bridges, institutions, and provide social infrastructure.
Avoid Tax Refunds
When we are faced with debt to the state, we often think about how to reduce it. Well, most tax laws understand the hardships of every taxpayer. However, tax services are available to those who do not pay taxes, which is a useful option for people who do not have free money or funds.
But why bother you about eliminating tax defaults? Paying taxes will save you the wasted time and energy of calling for taxes, or even jail time for tax evasion.
In view of the above, tax services should be reformed to make them more flexible to directly reduce non-payers and refund taxes.
It is also important to know that paying taxes makes us better citizens, helping to build a stronger nation for its citizens and the next generation that follows.
Although tax evasion is considered illegal, there are methods that can be used to resolve such actions without going to court. However, one stitch saves nine.
What do you think now? Do you still think taxes are beneficial to society or not?
Few people go to New Zealand for the tax benefits. Despite this, New Zealand doesn’t need to be a very tax-disadvantageous country to live in,