Expats & Immigrants
Offshore Investment Into New Zealand
If you are going to invest in New Zealand from offshore, you need advice on New Zealand tax and structures. No matter where you are tax resident, income produced in New Zealand creates tax obligations here.
At GRA we are specialists in advising on the New Zealand tax implications of inbound investments. We are particularly strong in relation to property investment, where the rules are relatively complex.
You also need to ensure you have the right structure in place. This is where GRA works in conjunction with your local tax adviser to ensure that you have the structure that seamlessly marries New Zealand and offshore requirements.
New Zealanders Investing Offshore
New Zealanders investing in property overseas are basically subject to the same tax rules as if the property were in New Zealand with regard to income and expenses, no matter what the rules are in the country where the property is located. Additionally, you will be subject to the tax rules of the country your investment property is situated in. If you don’t have the correct structure set up, you may find yourself having pay two lots of tax on the same income.
You may also need to take into account non-resident withholding tax (NRWT) and tax implications that can arise due to the fluctuating exchange rate if you have a foreign loan.
This is a specialist area, which we can help with at GRA.
If you are new to New Zealand or looking to move here, you need to understand the implications of assuming tax residency in New Zealand. On the face of it, New Zealand has quite onerous tax rules for new migrants, particularly where offshore investments and liabilities are retained. However, there are important exemptions that can apply to new and returning migrants. It is essential that you receive advice in relation to your tax residency position and whether the exemptions apply to you.
To give an example, say an Australian resident migrates to New Zealand but retains a property which is rented in Australia. There is a mortgage over the property with a debt owed to the Bank of Queensland. The property is high yield and produces a profit over and above expenses. In the absence of an exemption, the rental profit needs to be returned in New Zealand by applying New Zealand tax rules and is taxable here. There can also be a requirement to deduct non-resident withholding tax from interest paid to the Bank of Queensland and you can be subject to tax on movements in the exchange rate. On the other hand, if you are able to claim an exemption you can avoid all three of these outcomes.
If you are leaving New Zealand you need to carefully consider your tax position. Some of the following questions may need consideration:
- Will I remain a tax resident of New Zealand? Just because you depart New Zealand doesn’t mean you sever all ties. It is possible that you retain tax residency in New Zealand.
- If I retain tax residency in New Zealand what are the implications for me in terms of my activities offshore?
- If I leave assets and investments in New Zealand will I have tax obligations here?
- If I leave assets and investments in New Zealand and I become non-resident for tax purposes, are there any different rules that apply?
- Should my structures change as a result of me leaving and potentially becoming non-tax resident?
- How will my structure work in my new country of residence? Are there any disadvantages e.g. onerous capital gains tax?
There is a myriad of issues that you need to work through if you are leaving New Zealand. Note that this is a complicated area of tax law and one that is constantly under scrutiny from the IRD. At present they have proposals to broaden their interpretation of tax residency.
Have a look at the video below of an example structure for a couple who own rental properties in New Zealand and are planning to move to Australia.
Important note: As always, seek advice from professionals who are experts in this area before implementing any structure - every person's situation is different.
Example structure for NZ property investors moving to Australia
New Zealand tax rules in relation to trusts are unusual in that they focus on the residency of the settlors of the trust. Most countries focus on the residence of trustees. This means it is possible to set up a trust in New Zealand with a New Zealand resident trustee but have no tax obligations here because the settlors are not resident here and the trust is not carrying on business or deriving income that is sourced in New Zealand. Many offshore investors or business people find this to be a useful structure in terms of asset protection and estate planning, and given the way New Zealand tax rules work it doesn’t create any tax disadvantages.