These include the Recognized Seasonal Employer (CSR) with a Recognized Seasonal Employer Visa and the foreign crew of fishing vessels with a Fishing Crew Work Visa. The 183-day rules do not apply in this case. In the following, we explain these steps at a high level. Each person`s situation is slightly different, and we recommend that you seek expert advice to confirm the right position you need to take when filing your tax returns. For more information on employment tax considerations if you work for a foreign employer, or on covid-19 preferential rules announced by the tax authority that might apply to New Zealand`s tax residency tests, check out our other articles. If, according to their rules, you do not remain resident abroad for tax purposes, it is likely (although this must be confirmed by a tax specialist from that country) that you will only be taxed in that country on income received in that country. The Foreign Trust Rules are an example of this. Daily tests are taken into account to find out if someone is the resident settlor of a foreign trust. A settlor who is not a tax resident of New Zealand because the rules of ordinary daily tests are not applied is not a tax resident of New Zealand for tax purposes within the meaning of the Foreign Trust Rules. If you are a tax resident of New Zealand for the purposes of the tiebreaker tests, New Zealand has the right to tax you in accordance with New Zealand tax regulations. The overseas country may continue to have the right to tax the income of that country, subject to the provisions of the Convention. If you become a resident under the 183-day rule, then you can terminate your residence by staying outside New Zealand for more than 325 days (not necessarily consecutively) within 12 months, as long as you do not have permanent residence in New Zealand.
The exceptions listed above do not apply to public artists such as performing artists and professional athletes. You are subject to a maximum withholding tax (WHT) of 20%. Special rules apply to non-resident entrepreneurs. WHT must be deducted from payments to non-resident entrepreneurs who are not in possession of valid exemption certificates. The withholding tax is an intermediate tax that is deducted from the taxpayer`s final income tax. Non-resident entrepreneurs who reside in New Zealand for less than 92 days in a 12-month period and who are entitled to a full exemption under a DTA do not need to apply for an exemption certificate, although they may wish to do so in order to obtain a guarantee for the payer. In addition, all payments received from a non-resident contractor if the total contract payments over a 12-month period is less than NZD 15,000 are exempt from the non-resident entrepreneur`s withholding tax (NRCT). These rules mean that after 183 days, you will not qualify as a tax resident and will be taxed as a non-resident unless you establish permanent residence. Also known as the 183-day rule, you need to know how to count the “days present” in New Zealand. Individuals are subject to income tax on their worldwide income while being tax residents of New Zealand, subject to transitional residence rules. A New Zealand resident generally refers to a person who resides in New Zealand for more than 183 days in a 12-month period or who has permanent residence in New Zealand. The general rule is that a person residing in New Zealand can be assessed based on global income.
There are special rules if you are coming to New Zealand to work on a recognized seasonal employer visa or a fishing crew work visa. Another example is the transitional residence rules. The meaning of a transition resident refers to the daily testing rules in section YD 1. If a person`s place of residence is affected by the approach to COVID-19 testing in residence, the same applies to the review of transitional residence rules. Jim is not subject to source deduction obligations under PAYE rules because he stayed more than 92 days in these circumstances. Jim plans to leave as soon as he can. Now that you have an overview of the rules, you probably have more questions about how to apply these rules to your situation after recently moving to New Zealand. We recommend that you take advantage of specialized tax advice, with which we will be happy to help you. Please contact us if you have any questions about your particular situation. COVID-19 has had unintended consequences that impact tax residency rules. People may be encouraged to stay in New Zealand longer than planned and/or are now stranded in New Zealand.
Business leaders and employees may also be stranded in New Zealand or overseas due to COVID-19. If a crew member is not covered by this exemption, an exemption may be granted as a non-resident worker under the 92-day rule or the 183-day rule if a double taxation agreement applies. The 92-day rule is for non-residents who are employed by a non-resident and who provide professional or personal services in New Zealand. There is a 92-day test that excludes certain payments from sedular payments. These are payments for services provided by a non-resident entrepreneur who is fully exempt under a double taxation agreement and present in New Zealand for 92 days or less over a 12-month period. Due to the short period in which the contractor is present, the payment is not a sedular payment. If you are a tax resident of New Zealand, you will become a non-resident taxpayer if you are both:. A non-resident of New Zealand is generally a person who spends 183 days or less over a 12-month period in New Zealand and does not have permanent residence in New Zealand. A non-resident entrepreneur is a natural person who is present in New Zealand for more than 92 days in a tax year, provides services in New Zealand and payments are made by a New Zealand company to the non-resident entrepreneur for those services. A transition resident is a new tax resident in New Zealand who has not been a resident for 10 years before arriving in New Zealand or returning to New Zealand. Conversely, a person does not become a tax resident of New Zealand if he: You become a resident of New Zealand if you have been in New Zealand for more than 183 days in a total period of 12 months. The gift of part of a day in New Zealand is counted as a whole day of the present.
In addition to New Zealand`s domestic agreements, which provide for relief from international double taxation, New Zealand has entered into double taxation treaties with 40 countries/jurisdictions to avoid double taxation and to enable cooperation between New Zealand and foreign tax authorities in the application of their respective tax laws. Richard was on assignment in different countries before the pandemic and was on holiday in New Zealand until he was hit by the lockdown. He can`t leave for his next backpacker vacation destination. He can return to the United Kingdom, where he has his permanent residence. He decides to stay in New Zealand in the hope of continuing to his next backpacker holiday destination when that border finally opens. Once Richard has been present in New Zealand for 183 days or more over a 12-month period, he will become a tax resident in New Zealand on a regular application of the 183-day test. All the days Richard was present in New Zealand are numbered. Indeed, the concession of variant VOC 22/06, not counting the days when a person is stranded in New Zealand, applies only if he leaves within a reasonable time after he is no longer practically restricted.
The 183-day test is valid from the first day counted. How does a tax treaty apply to my residency position? Some non-resident crew members may have planned to leave the country before the services they provide in New Zealand become taxable. Due to COVID-19, they can no longer simply leave the country. If the non-resident crew member continues to provide the same services as before the current emergency conditions, they should not lose the exemption simply because they are stranded in New Zealand. A person is denied a deduction for an amount of expense or loss to the extent that he or she is incurred for the generation of employment income. Some expenses can be reimbursed tax-free. In general, it must be shown that the expenses to be reimbursed are additional expenses resulting from the deductions from employment or that they are of the type prescribed by the IRD as relocation costs. Income earned in New Zealand may not be taxable if the employee is present in New Zealand for 92 days or less in a taxation year and provides services to (or on behalf of) a person who is not a resident of New Zealand, and the income earned is taxed in the country/jurisdiction where the person is resident.
If you are unsure of your tax residency status, complete the New Zealand Tax Residency Questionnaire — IR886. You can send us a message in myIR with the completed and attached questionnaire. You can also send it to us by post to the address indicated in the questionnaire. You may be one of the many Kiwis over 20,000 who returned to New Zealand after April 1, 2020 (the start of the tax year in New Zealand). If so, and you have questions about how you are taxed in New Zealand, this might be the right article for you! An exemption from New Zealand taxation may be possible under a double taxation agreement.