I am not living in New Zealand – But am I a New Zealand tax resident?
For New Zealand citizens living abroad, it can be at times confusing as to whether you are still a New Zealand tax resident even though you are based overseas. This article background information on New Zealand tax residency.
How is tax residency determined in New Zealand?
In New Zealand, you are a tax resident if you:
- Are in New Zealand for more than 183 days in any 12-month period, or
- Have an “enduring relationship” with New Zealand.
Two key questions then are how do I break my tax residency and what is the definition of an “enduring relationship”.
How do I go about breaking New Zealand tax residency?
According to the Inland Revenue Department (IRD), a person will cease to be a New Zealand tax resident if he/she has been out of the country for more than 325 days in any 12-month period, and he/she no longer has an “enduring relationship” with New Zealand. In order to break New Zealand tax residency, you must also not have been in New Zealand for more than 183 days in any 12-month period in addition to satisfying the two above conditions.
What is the test of “enduring relationship”?
The “enduring relationship” test refers to whether a person has a “permanent place of abode” (PPA) in New Zealand. This test overrides the 183-day rule so it is possible for you to be a New Zealand tax resident even if you have been out of the country for more than 325 days in any 12-month period as long as the IRD deems you have a PPA in New Zealand.
For the purpose of determining tax residency, PPA refers to more than just the dwelling you live or lived in, and includes all of your social, physical, economic, and personal ties with New Zealand. Examples of ties with New Zealand can be found here.
It is possible for you to have similar ties in another country, in which case you are likely a tax resident in both New Zealand and the other country. In this case, your tax obligations will be subject to the terms and conditions outlined in the double tax agreement between New Zealand and the other country.
Is a dwelling required for a person to have a PPA?
According to the latest Interpretation Statement released by the IRD, as of April 1st 2014, the PPA test requires a person to have a dwelling in New Zealand. Typically, this refers to a dwelling in New Zealand that you can potentially live in on an on-going rather than temporary basis.
Would having rental properties in New Zealand make me a tax resident?
According to the IRD, generally you would not be a tax resident solely on the basis of having rental properties in New Zealand. This is because properties that have always been held for investment purposes would not normally be a person’s PPA, in which case you would not be deemed to have an “enduring relationship” with New Zealand. However, there are cases in which a rental property could be a PPA, i.e. family home rented out while you are overseas, however the test would need to determine your intentions with regards to treatment of the home, i.e. do you intend to use the home as a PPA if you are back in the country.
Ultimately, simply having rental properties in New Zealand does not automatically make you a New Zealand tax resident, and your tax residency status will depend on your overall ties to the country.
I live and work in another country, but I have “enduring ties” with New Zealand. How will my income be taxed in this case?
In general, if you are a tax resident in two countries and there is a double tax agreement (DTA) between the countries, then you will be taxed in the country where you have a permanent home. In this case, if you live outside of New Zealand, you would not be required to declare your worldwide income for New Zealand tax purpose unless otherwise specified in the DTA between New Zealand and the country you reside in, or there is no DTA between the two countries.
We have summarised some of the facts regarding tax residency tests and tax obligations for some countries around the world. They can be found below.
UK tax residents
Australian tax residents
Singapore tax residents
Disclaimer
The information provided in this article is not intended to provide a comprehensive statement of tax laws and should not be used as a substitute for legal advice.
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