By Kathleen Duan (CA) Q-Business Advisory Chartered Accountant
Not many people really understand what Tax Resident mean.
In New Zealand residence for tax and residence for immigration are not the same. If you are coming to New Zealand or going overseas, you may need to work out your residency for tax purposes.
According to the Inland Revenue of New Zealand, tax residency status is different from immigration status. An individual will be a tax resident of New Zealand if they meet one of two tests:
They are physically present in New Zealand for more than 183 days in any 12-month period (the “Day Count Test”); and/or
Their permanent place of abode (PPOA test) is in New Zealand.
In contrast, immigration status determines whether an individual can stay in a country and what they can do there.
To be a New Zealand tax resident, after the first 4 years transitioning period, a tax resident is liable for declare their world-wide income, while a non-tax resident is only liable for New Zealand sourced income.
For an example, Mary was born in New Zealand, and she is a Permanent Resident and citizen of New Zealand. However, she moved to England in January 2020 after graduating from university like many young kiwis do. Since then, she only comes back to New Zealand for Christmas holiday for the period of less than one month each time. For the immigration purpose, she is still a New Zealand Resident; however, for the tax purpose, she is no longer a New Zealand Tax Resident. Therefore, Mary does not need to declare her income sourced from England after January 2020, she only needs to declare her New Zealand sourced income, such as rental properties, bank interest. However, if she keeps her house in New Zealand and not rent out, she may become a New Zealand tax resident.
Another example, Ben came to New Zealand in January 2020 as an overseas student studying in New Zealand, he has been living in Auckland since then, he only goes back to China during Christmas holiday and stays in China for less than 3 months each year. He holds a student visa, therefore he is not a New Zealand resident for immigration purpose, but a resident for tax purpose. From January 2020, not only he needs to declare his New Zealand sourced income, but also his world-wide overseas income.
Becoming a New Zealand tax resident can have a significant tax implication for those people have large amount of overseas investment and income. Carefully planned immigration can avoid unexpected tax liabilities. If you are unsure, talk to us, we can help.
Disclaimer: The information provided on this article is for general informational purposes only and should not be relied upon as tax advice. The content on this website is not intended to be a substitute for professional tax advice, diagnosis, or treatment. Always seek the advice of qualified legal professionals with any questions you may have regarding your personal situation. Reliance on any information provided by this article is solely at your own risk.
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