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For non-residents & visitors: Moving to New Zealand
People becoming tax residents in New Zealand may qualify for a temporary tax exemption on some of their foreign income. This temporary tax exemption is available to those who:
- qualify as a tax resident 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 qualifying as a tax resident in New Zealand (transitional residents).
The exemption can only be granted once in a lifetime.
Temporary tax exemption
The temporary tax exemption for foreign income is for 4 calendar years (up to 49 months). The exemption starts on the first calendar day of the month you qualify as a tax resident in New Zealand and ends on the last calendar day of that month four years later.
Matt qualifies as a tax resident in New Zealand on 22 April 2010 and has one or more types of foreign income that are temporarily exempt for taxes in New Zealand (see list below). Matt is eligible for the exemption from 1 April 2010 until 31 April 2014, which is 49 months.
Types of exempt foreign income
The following types of foreign income are temporarily exempt from tax in New Zealand.
- Controlled foreign company income that is attributed under New Zealand's controlled foreign company (CFC) rules.
- Foreign investment fund income that is attributed under New Zealand's foreign investment fund (FIF) rules (including foreign superannuation).
- Foreign income subject to non-resident withholding tax (for example on foreign mortgages).
- Foreign income subject to approved issuer levy (for example on foreign mortgages).
- Income arising from the exercise of foreign employee share options.
- Accrual income (from foreign financial arrangements).
- Income from foreign trusts.
- Rental income derived offshore.
- Foreign dividends.
- Foreign interest.
- Royalties derived offshore.
- Income from employment performed overseas before coming to New Zealand, such as bonus payments.
- Gains on sale of property derived offshore (held on revenue account).
- Offshore business income (that is not related to the performance of services).
When your tax exemption ends after 4 years (up to 49 months), you must declare all foreign income on your annual income tax return (IR3 for individuals).
Foreign income that is not tax-exempt
These types of foreign income are not tax exempt in New Zealand:
- Employment income from overseas employment performed while living in New Zealand.
- Business income relating to services performed offshore.
If you have any of these types of income, you must declare them on your Individual tax return (IR3) from the date of your arrival in New Zealand.
Eligibility for transitional resident concessions
To be eligible for the transitional resident concessions, you must satisfy the following requirements.
- You became a tax resident in New Zealand on or after 1 April 2006, and
- you must not have been a New Zealand tax resident at any time in the past 10 years prior to you becoming a tax resident in New Zealand.
- This is a once in a lifetime exemption, you cannot extend your tax exemption or renew it after its expiry date.
- You or your partner cannot receive Working for Families Tax Credits while being tax exempt from foreign income, but will have to determine which is better for your situation.
You and your partner have derived foreign interest of $1,000 per annum. You are also eligible for Working for Families Tax Credits totalling $5,000 per annum if you do not claim the exemption for foreign income.
In this situation, it is in your family's best interest to waive the exemption and pay New Zealand tax on the foreign interest and receive Working for Families Tax Credits. You can tell us about your foreign income on your IR3.
Your obligations if you are granted the tax exemption
The tax exemption is automatically granted if you qualify. You do not have to contact us with your information.
You are required to provide us with accurate information and to notify us of any foreign income that is not tax exempt by filing an IR3 every year as long as you have foreign income.
When your tax exemption expires, you must include all your foreign income when you file your IR3 along with your New Zealand income. You must file an income tax return after the end of your exemption, and every tax year after that as long as you have foreign income, regardless of whether or not you notified us of your foreign income upon your arrival.
Apportion your foreign income in your tax return
If your exemption expires at any time in a tax year other than on the standard balance day of 31 March, you will have to apportion your foreign income in your tax return for that year.
Simon qualifies as a tax resident in New Zealand on 10 September 2010 and has one or more types of foreign income that are temporarily exempt for taxes in New Zealand. Simon also fulfils the other eligibility criteria as listed above. In this case, Simon will be eligible for the temporary tax exemption from 1 September 2010 until 30 September 2014.
However, September is in the middle of a standard New Zealand tax year that runs from 1 April to 31 March. As Simon receives foreign income after 30 September 2014, he needs to declare the foreign income earned from 1 October 2014 until 31 March 2015 on his IR3 for the 2015 tax year (to 31 March 2015).
If you need to contact us, you can either:
- login to myIR Secure Online Services and send us secure mail
- call us within New Zealand on 0800 227 774 or from overseas on 64 4 978 0779, or
- send us a letter.