Taxes for Expats in New Zealand

    Your complete guide to expat tax in New Zealand:

    Tax rates

    2017/2018 income tax rates

    Taxable Income Band NZD National Income Tax Rates
    0 - 14,000 10.5%
    14,001 - 48,000 17.5%
    48,001 - 70,000 30%
    70,001 + 33%

     

    The non resident withholding tax rate is generally 15% which may be further reduced by reference to a double tax agreement with a country in which you are tax resident.

    Who pays

    Who pays tax in New Zealand?

    Resident expats are subject to income tax on worldwide income. Non-resident individuals pay tax on New Zealand-source income only.

    How it works

    How is income taxed in New Zealand?

    Expat employment income - Gross income includes all salaries, wages, bonuses, retirement payments and other compensation. Employer-paid items, including hardship allowances, taxes, meals, permanent housing and tuition for dependent children, are generally included in gross income. Payments or reimbursements by employers of some relocation expenses may be excluded from gross income. Employer-provided accommodation for expats up to 3 months after arrival as a result of a work-related relocation is specifically exempt from income tax and fringe benefit tax according to expat tax rules.

    The government has introduced a work-based savings initiative called KiwiSaver. Most employers must make compulsory contributions to a KiwiSaver fund or a complying superannuation fund for all eligible employees who have elected to participate. To be eligible, expat employees must satisfy the following conditions:

    • They must be New Zealand citizens or entitled to live permanently in New Zealand
    • They must normally live in New Zealand
    • They are under 65 years old.

    Employers are subject to withholding tax on all KiwiSaver contributions.

    Income from personal services (salary and wages) rendered by a non-resident in New Zealand is generally not taxable if the non-resident is physically present in New Zealand for less than 92 days and if the income is taxable in the non-resident individual's country of tax residence. This period is often extended to 183 days by double tax treaties. In general, these expat tax rules do not apply to non-resident entertainers or non-resident contractors, who are normally subject to withholding tax on all income unless they have obtained exemption or nil rate certificates. Non-resident contractors may be exempt from withholding tax without obtaining exemption certificates if either of the following applies:

    • They are eligible for total relief from tax under a double tax treaty and they are physically present in New Zealand for 92 days or less in any 12-month period.
    • The total amount of contract payments made for the contract activities is NZD15,000 or less in any 12-month period.

    Expat tax on self-employment and business income - Self-employed persons are subject to tax on profits derived from any business activity, including the sales of goods, services and commissions.

    Non-resident entertainers are subject to withholding tax at a rate of 20%. This tax may be treated as a final tax. Non-resident contractors are generally subject to withholding tax at a rate of 15% for income from contract services. This tax is neither a minimum nor a final tax and is paid on account of any annual income tax liability.

    Business losses may be offset against a taxpayer's other net income in the year when the loss is sustained. The balance of any loss may be carried forward and offset against future net income of the taxpayer.

    Expat Directors' fees - Directors are generally taxed as self-employed persons. No special provisions apply other than a requirement to deduct withholding tax at a rate of 33%.

    Expat Investment income - Dividends received from a New Zealand resident company may have imputation credits attached. The imputation credit represents tax paid by the company on the underlying profit from which the dividends are paid that is passed on to the shareholder. A resident shareholder is assessed on the combined amount of the dividend plus the imputation credit, and receives a tax credit for the amount of the imputation credit. Non-residents do not receive a tax credit for the amount of imputation credit.

    Income earned on expat investments in certain unlisted portfolio investment entities (PIEs) may be allocated and taxed at the fund level at individual investor rates, with a maximum rate of 28% and no further tax on distribution. Listed PIE distributions may also be excluded from gross income.

    Dividends (other than PIE distributions) and interest paid by New Zealand resident companies to New Zealand resident expats are generally subject to an interim tax through a resident withholding tax (RWT) deduction.

    The RWT rate on dividends is 33%, reduced by any imputation credits attached to the dividends.

    Certain types of interest are exempt from RWT.

    The rates of RWT on interest are elective rates of 10.5% (for individuals who expect their annual gross income will not exceed NZD14,000 and for trustees of deceased estates), 17.5%, 30% or 33% if the interest recipients supply their tax identification numbers. The RWT rate on interest paid to companies is generally 28% if the recipients supply their tax identification numbers. The default RWT rate if interest recipients do not supply their tax identification numbers is 33% for all recipients. The recipients include the gross interest and dividends in their gross income and receive a credit for RWT.

    Non-residents are subject to withholding tax at a rate of 30% on dividends. This rate is reduced to 15% to the extent that cash dividends are fully imputed or to the extent that imputation credits are passed on through the payment of supplementary dividends under the foreign investor tax credit regime. The rate is reduced to 0% to the extent that non-cash dividends are fully imputed.

    A 0% rate also applies to fully imputed cash dividends paid to non-residents if the non-residents have a direct voting interest of at least 10% or if a tax treaty would reduce the New Zealand tax rate below 15% for expats.

    Non-residents are subject to withholding tax at a rate of 15% for interest and royalties. Certain tax treaties may reduce this rate although it is advisable to seek expatriate tax advice.

    Non-resident withholding tax is a final tax on dividends, cultural royalties and interest paid to non-related persons. It is a minimum tax on non-cultural royalties and on interest paid to related persons. Non-resident withholding tax rates may be reduced under New Zealand's double tax treaties. A 0% rate of non-resident withholding tax may apply to interest paid to unrelated non-residents by transitional residents in relation to money borrowed while they were non-residents, so long as the interest does not relate to carrying on a business through a fixed establishment in New Zealand.

    As an alternative to non-resident withholding tax on interest, if the borrower and lender are not related persons and if the interest is paid by a person registered as an approved issuer with respect to a registered security, the interest is subject only to an approved issuer levy of 2% of the interest actually paid. The New Zealand government pays the 2% levy on interest paid on its loans from non-residents that meet these criteria. Non-resident withholding tax and approved issuer levy may be imposed at a rate of 0% on interest paid to non-resident holders of certain widely held corporate bonds and similar securities.

    The foreign investor tax credit (FITC) provisions reduce the effective rate of New Zealand tax imposed on dividends received by a non-resident investor from a New Zealand company. Further details should be made  available by your expat tax adviser.

    Residency

    Expat tax advice on residency

    Individuals are considered resident in New Zealand for tax purposes if they meet either of the following conditions:

    • They have a permanent place of abode in New Zealand, regardless of whether they also have a permanent place of abode outside New Zealand.
    • They are physically present in New Zealand for more than 183 days in any 12-month period.
    Resident expats arriving for the first time in New Zealand after 1 April 2006, or who have been absent for at least 10 years before returning to New Zealand, are considered to be transitional residents and are eligible for an exemption on certain income arising from sources outside New Zealand for the first 48 months of their residence. However, transitional residents can elect to waive the exemption if expat tax rules are beneficial in New Zealand.
    Social security

    Social security for expats in New Zealand

    New Zealand does not have a social security system requiring compulsory contributions from employees and expat tax rules do not provide for special additional contributions. However, under the Accident Compensation Act 2001 (previously called the Injury Prevention, Rehabilitation and Compensation Act 2001), levies are payable by employers, employees and self-employed people to fund the comprehensive no-fault accident compensation scheme, which covers all accidents at home and at work. 

    The levies are payable on employment income of up to NZD118,191 for the year ending 31 March 2015 and up to NZD120,070 for the year ending 31 March 2016. For employers and self-employed persons, the rate of the levy depends on the relevant industry classification. For employees, the rate of the levy is 1.45% from 1 April 2014.

    DTAs

    Taxes for expats in New Zealand: Double tax relief and tax treaties

    If a resident expat derives income from a foreign country, foreign income tax paid on that income is allowed as a credit against income tax payable in New Zealand.

    The credit is limited to the amount of tax payable in New Zealand on the same foreign-source income.

    New Zealand has entered into comprehensive double tax treaties with 39 countries.

    IHT & CGT

    Do I have to pay capital gains tax and inheritance tax?

    New Zealand has no general capital gains tax, but profits from the sale of real and personal property may be subject to regular income tax in certain circumstances, including the following:

    • The taxpayer's business consists of dealing in that real or personal property.
    • The taxpayer's purpose at the time of acquisition was to sell the property at a later date.

    An accrual taxation system applies to New Zealand resident individuals who are parties to various types of financial arrangements, including debts and debt instruments. Under the accrual system, foreign-exchange variations related to the financial arrangements are included in calculations of income and expenditure.

    There is no estate tax in New Zealand: however, do not assume that just because you've expatriated to live in New Zealand that your estate will not be liable to inheritance tax (IHT) in your old home nation, or any nation where you hold assets.  For example, those domiciled in Britain remain liable for IHT on their worldwide estate.

    If you are concerned about mitigating your IHT liability, we'd like to offer you a free initial consultation to determine whether we can help you.

    Finally...

    We believe the above information is accurate, however tax rates and rules can change, and we are NOT tax experts.  Therefore, please do not rely exclusively on the information to determine your liability for tax.

    Speak to a local tax expert for personalised advice, or consult an international taxation consultancy.

    If you'd like our help to source someone to assist you, please get in touch and we will do all we can to help.

    Relax, and join the 10,000 other international investors who have made the smart decision to let us help.

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