New Zealand is one of the most prosperous countries of the Asia-Pacific region due to its strong commitment to economic freedom, solid public finance management and strong protection of property rights. New Zealand has always attracted expats from different parts of the world. However, many expats in New Zealand don’t realize the complexity of the New Zealand tax system. Moreover, American expats New Zealand have to lodge US expatriate tax returns if they meet the U.S. filing requirements. Consequently, US expatriates should learn more about foreign earned income exclusion, foreign housing exclusion and foreign tax credits.
Should I pay foreign income taxes on my income in New Zealand? How can I minimize US expat taxes when I file US expatriate tax returns? Do you offer US expat tax services to American expats New Zealand? These are some of the basic questions from our clients in New Zealand.
Key Expatriate Tax Rules for Expats New Zealand
Since American expats in New Zealand are subject to pay US expat taxes on their worldwide income, they have lodge a tax return in New Zealand as well as US expatriate tax returns on overseas taxes.
However, American expats in New Zealand can minimize US expat taxes under Internal Revenue Code section 911.
- Foreign earned income exclusion. American expatriates may be able to exclude up to $101,300 for 2016 but they have to lodge US expatriate tax returns and meet either bona fide test or physical presence test.
- Foreign housing exclusion. American expats New Zealand can minimize US expat taxes on foreign income by deducting foreign housing expenses.
- Foreign tax credit. Expats New Zealand can take a foreign tax credit for income taxes paid in New Zealand.
American expats in New Zealand may be required to file two additional forms like FBAR or FATCA.
Tax system in New Zealand – FAQ
I am an American expat living in New Zealand. Is my worldwide income taxed in New Zealand?
An expatriate who is considered a resident in New Zealand is taxed on the worldwide income. Moreover, the worldwide income is taken into consideration to determine effective tax rates. Expats can take a foreign tax credit for overseas income taxes paid in New Zealand.
Who is considered a tax resident in New Zealand?
An expat in New Zealand is considered a resident if s/he meets one of the following requirements:
– Person who has a permanent place of abode in New Zealand.
– Person who is physically present in New Zealand for 183 or more days in any 12-month period.
What is the tax year in New Zealand?
The tax year in New Zealand is to March 31. Tax return due date is July7 if it is required. The USA uses a calendar tax year so it is important to report all income on a calendar basis for U.S. tax purposes.
What are income tax rates in New Zealand?
New Zealand uses a progressive tax rate. The tax rates for the 2013 tax year are 10.5% on income up to NZD14,000, 17.5% on taxable income between NZD14,001 and NZD48,000, 30% on taxable income between NZD48,001 and NZD70,000 and 33% on taxable income over NZD70,001. American expats New Zealand can claim a foreign tax credit for overseas taxes paid in New Zealand.
Which income is considered a taxable income in New Zealand?
Generally, all types of earned income (base salary, expatriation premiums for working in New Zealand, school tuition reimbursements) including housing received are fully taxable in New Zealand. Careful tax planning is required to minimize overseas taxes paid in New Zealand.
Can an American expat in New Zealand file an expatriate tax return on overseas taxes with a spouse?
Spouses are considered separate taxpayers in New Zealand, however, the concept of family is relevant for certain welfare purposes.
Is it required to file an expat tax return in New Zealand every year?
Tax payers who derive income only from employment, interest and dividends with a tax withheld at a source are not required to file a tax return. Moreover, at the end of tax year the Inland Revenue may issue a personal summary that will outline whether there is any refund due or tax to pay.
Does New Zealand have a tax treaty and social security agreement with the USA?
New Zealand has an income tax treaty with the USA. However, there is no totalization (social security) agreement between the USA and New Zealand as of today.
These are some of the basic overseas tax issues that American expats New Zealand should consider. It is important to follow the latest updates issued by the Inland Revenue of New Zealand.
American expats who need further guidance about overseas taxes paid in New Zealand or the ways to minimize US expat taxes on US expatriate tax returns, should seek help of an expat tax professional that provides international tax services. International tax experts at Artio Partners will be pleased to assist you.