The natural beauty, world-class waves and friendly culture of New Zealand entice many Americans to pack up and enjoy the expat lifestyle there. Whether you choose to make New Zealand your permanent or temporary home, it is important to understand the expat tax situation in both your host and home countries. Fortunately, we’ve outlined the 7 things you need to know as an expat living in New Zealand.
The natural beauty, world-class waves and friendly culture of New Zealand entice many Americans seeking an escape. For those that decide to stay on a more permanent basis, however, it is important to understand the tax situation in both your host and home countries. Fortunately, we’ve outlined the 7 things you need to know as an expat living in New Zealand.
In New Zealand, income is taxed at a rate of 10.5 percent to 33 percent. For non-residents, income is taxed at a flat rate of 15 percent, which may be reduced due to a double taxation agreement between the US and New Zealand.
To be classified as a New Zealand tax resident, you must be in New Zealand for more than 183 days in a 12-month period and have an enduring relationship with New Zealand. An enduring relationship means you have a permanent place of abode that covers social, physical, economic and personal ties to New Zealand.
The tax year in New Zealand runs from April 1st to March 31. All taxes are due before July 7th to the Inland Revenue Department. However, an extension until March 31 of the following year is available.
Tax payments are generally made in three installments on August 28th, January 15th and May 7th.
Anyone earning income in New Zealand is required to contribute to their Social Assistance System. Since there is no Totalization Agreement between the US and New Zealand, US expats may face double taxation.
In addition to income tax, employees must pay into the Accidental Compensation Corporation. This provides insurance in “no fault” accidents and is taxed around 2 percent.
There is also a Goods and Services Tax of 12.5 percent. However, there is no capital gains tax in New Zealand.
If you are a US citizen or resident, you will still be required to file US taxes each year. If you have assets in foreign bank accounts, you may be required to report those as well. Specifically, anyone with 10,000 dollars or more in a foreign bank or financial institution during a calendar year will be required to file the FBAR.
Fortunately, there are a few ways you can lower or eliminate your US tax obligations. The first is the Foreign Earned Income Exclusion, which allows you to exclude a certain amount from your foreign earned income on your US expat taxes.
The second is the Foreign Tax Credit, which allows you to offset the taxes you paid in your host country with your US expat taxes dollar for dollar.
And third is the Foreign Housing Exclusion, which allows an additional exclusion from income on US expat taxes for certain amounts paid for household expenses that occur as a consequence of living abroad.
If you have any questions about filing your US expat taxes, please contact us.
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