myIR, payments and more
- Are there any concessions if you have just arrived in New Zealand
- Are you entitled to Working for Families Tax Credits
- What if you’ve already paid tax in another country
- Transitional residents prescribed investor rate
If you have just arrived in New Zealand and meet the following criteria, you may qualify for a temporary tax exemption on some of your foreign-sourced income. If you:
- became a New Zealand tax resident on or after 1 April 2006, and
- have not been a New Zealand tax resident at any time in the past 10 years before you became a tax resident in New Zealand, and
- have not qualified for this temporary tax exemption before.
You will be known as a transitional resident and the exemption will apply for 48 months following the month in which you become a New Zealand tax resident.
New Zealand has an entitlement where families with dependent children (under the age of 18) may be eligible to receive Working for Families Tax Credits (WfFTC).
There are four criteria you must meet before you will be entitled to WfFTC. One of these that must be met is the residency criterion. To be entitled to a payment you must meet at least one of the following residency requirements. Either:
- you are a New Zealand resident and have been in New Zealand continuously for at least 12 months at any time. You must be both a tax resident and resident in New Zealand when you apply for your payments; or
- the child(ren) you're claiming for is(are) both resident(s) and present in New Zealand.
If you apply for WfFTC you are no longer eligible for the transitional resident concession.
If you are a New Zealand resident for tax purposes, and you've:
- derived income from another country and
- been required to pay tax on that income in the foreign country
you may also be required to pay tax on that income in New Zealand .
Just because tax has been paid in a foreign country on certain income does not mean that an individual is not required to pay New Zealand tax on the same income. However, subject to certain limitations, New Zealand will allow a credit for the tax paid.
If you've already paid tax in another country New Zealand may allow you a foreign tax credit.
A foreign tax credit is the amount of tax that has already been paid in a foreign country but can be claimed as a credit to offset the tax payable in New Zealand.
Limitations on the foreign tax credit
The foreign tax credit available in New Zealand is limited to the lesser of tax payable in New Zealand on the net income (ie, after deducting any allowable tax deductions in relation to that overseas income) or the tax paid offshore.
A foreign tax credit is only available if the tax paid in the foreign country is an "income tax of a foreign country". This means that you will not get a credit for other types of taxes paid in the foreign country.
Transitional residents (essentially new residents to New Zealand) are given a four-year exemption on their foreign-sourced investment income. Their New Zealand-sourced investment income is fully taxed from day one.