4 year tax break
May 22nd 2007, 1:56 pm
#1
Forum Regular
Thread Starter
Joined: Oct 2004
Posts: 104
4 year tax break
Can anyone just clarify what the 4 year tax break exactly covers?
Is it right that if you have money in a uk or any offshore account and you emmigrate to NZ you dont pay any tax on the savings for the first 4 years and that will also cover any income earned outside of NZ such as rent....is that right?
ie so if we sell the house and stick it in a savings account in the uk we will get 5.7% interest or whatever it is and pay no tax either in the UK or NZ??
Cheers for any replies.
Is it right that if you have money in a uk or any offshore account and you emmigrate to NZ you dont pay any tax on the savings for the first 4 years and that will also cover any income earned outside of NZ such as rent....is that right?
ie so if we sell the house and stick it in a savings account in the uk we will get 5.7% interest or whatever it is and pay no tax either in the UK or NZ??
Cheers for any replies.
May 22nd 2007, 8:29 pm
#2
BE Enthusiast
Joined: Feb 2006
Posts: 440
Re: 4 year tax break
I have no idea but would love to know myself.
Is it really 5.7% on a savings account now?
Ash
Is it really 5.7% on a savings account now?
Ash
May 22nd 2007, 9:25 pm
#3
Forum Regular
Joined: Apr 2006
Location: Brookby
Posts: 235
Re: 4 year tax break
Moving to New Zealand
Temporary tax exemption on foreign income for new migrants and returning New Zealanders
From 1 April 2006, people becoming tax residents in New Zealand may qualify for a temporary tax exemption on some of their foreign income. This temporary tax exemption is available to those who qualify as a tax resident in New Zealand on or after 1 April 2006 and are new migrants or returning New Zealanders (transitional residents) who have not been resident for tax purposes in New Zealand for at least 10 years prior to their arrival in New Zealand.
The exemption can only be granted once in a lifetime.
The exemption
The temporary tax exemption for foreign income is for four calendar years (up to 49 months). The exemption starts on the first calendar day of the month you qualify as a tax resident in New Zealand and is valid until the last calendar day of that month four years later. For example:
You qualify as a tax resident in New Zealand on 22 April 2006 and have one or more types of foreign income that are temporarily exempt for taxes in New Zealand (see list below). You are eligible for the exemption counting from 1 April 2006 until 30 April 2010, which effectively is 49 months.
Exempt types of foreign income
Types of foreign income which are temporarily exempt from tax in New Zealand:
Controlled foreign company income that is attributed under New Zealand's Controlled Foreign Company (CFC) rules
Foreign investment fund income that is attributed under New Zealand's Foreign Investment Fund (FIF) rules (including foreign superannuation)
Non-resident withholding tax (for example on foreign mortgages)
Approved issuer levy (for example on foreign mortgages)
Income arising from the exercise of foreign employee share options
Accrual income (from foreign financial arrangements)
Income from foreign trusts
Rental income derived offshore
Foreign dividends
Foreign interest
Royalties derived offshore
Income from employment performed overseas before coming to New Zealand, such as bonus payments
Gains on sale of property derived offshore (held on revenue account)
Offshore business income (that is not related to the performance of services).
When your tax exemption ends after four years (up to 49 months), you must declare all foreign income on your annual income tax return (IR3 for individuals).
These types of foreign income are not tax exempt in New Zealand:
Employment income from overseas employment performed while living in New Zealand
Business income relating to services performed offshore.
If you have any of these types of income, you must declare them on your annual income tax return (IR3 for individuals) from the date of your arrival in New Zealand.
To be eligible
You must have become a tax resident in New Zealand on or after 1 April 2006, and
You must not have been a New Zealand tax resident at any time in the past 10 years prior to your arrival date in New Zealand. Read more about tax residency
This is a once in a lifetime exemption eg you can't extend your tax exemption or renew it after its expiry date
You or your partner cannot receive Working for Families Tax Credits while being tax exempt from foreign income, but will have to determine which is better for your situation, for example:
You and your partner have $1,000 worth of foreign interest per year, but are eligible for $5,000 per year Working for Families Tax Credits in New Zealand if you do not claim the exemption for foreign income. In this situation, it is in your family's best interest to waive the exemption and pay New Zealand tax on the foreign interest and receive Working for Families Tax Credits. You can inform us of your foreign income on your annual income tax return (IR3 for individuals).
Read more about Working for Families
Think that covers it
Karen
Temporary tax exemption on foreign income for new migrants and returning New Zealanders
From 1 April 2006, people becoming tax residents in New Zealand may qualify for a temporary tax exemption on some of their foreign income. This temporary tax exemption is available to those who qualify as a tax resident in New Zealand on or after 1 April 2006 and are new migrants or returning New Zealanders (transitional residents) who have not been resident for tax purposes in New Zealand for at least 10 years prior to their arrival in New Zealand.
The exemption can only be granted once in a lifetime.
The exemption
The temporary tax exemption for foreign income is for four calendar years (up to 49 months). The exemption starts on the first calendar day of the month you qualify as a tax resident in New Zealand and is valid until the last calendar day of that month four years later. For example:
You qualify as a tax resident in New Zealand on 22 April 2006 and have one or more types of foreign income that are temporarily exempt for taxes in New Zealand (see list below). You are eligible for the exemption counting from 1 April 2006 until 30 April 2010, which effectively is 49 months.
Exempt types of foreign income
Types of foreign income which are temporarily exempt from tax in New Zealand:
Controlled foreign company income that is attributed under New Zealand's Controlled Foreign Company (CFC) rules
Foreign investment fund income that is attributed under New Zealand's Foreign Investment Fund (FIF) rules (including foreign superannuation)
Non-resident withholding tax (for example on foreign mortgages)
Approved issuer levy (for example on foreign mortgages)
Income arising from the exercise of foreign employee share options
Accrual income (from foreign financial arrangements)
Income from foreign trusts
Rental income derived offshore
Foreign dividends
Foreign interest
Royalties derived offshore
Income from employment performed overseas before coming to New Zealand, such as bonus payments
Gains on sale of property derived offshore (held on revenue account)
Offshore business income (that is not related to the performance of services).
When your tax exemption ends after four years (up to 49 months), you must declare all foreign income on your annual income tax return (IR3 for individuals).
These types of foreign income are not tax exempt in New Zealand:
Employment income from overseas employment performed while living in New Zealand
Business income relating to services performed offshore.
If you have any of these types of income, you must declare them on your annual income tax return (IR3 for individuals) from the date of your arrival in New Zealand.
To be eligible
You must have become a tax resident in New Zealand on or after 1 April 2006, and
You must not have been a New Zealand tax resident at any time in the past 10 years prior to your arrival date in New Zealand. Read more about tax residency
This is a once in a lifetime exemption eg you can't extend your tax exemption or renew it after its expiry date
You or your partner cannot receive Working for Families Tax Credits while being tax exempt from foreign income, but will have to determine which is better for your situation, for example:
You and your partner have $1,000 worth of foreign interest per year, but are eligible for $5,000 per year Working for Families Tax Credits in New Zealand if you do not claim the exemption for foreign income. In this situation, it is in your family's best interest to waive the exemption and pay New Zealand tax on the foreign interest and receive Working for Families Tax Credits. You can inform us of your foreign income on your annual income tax return (IR3 for individuals).
Read more about Working for Families
Think that covers it
Karen
May 22nd 2007, 9:31 pm
#4
Forum Regular
Joined: Apr 2006
Location: Brookby
Posts: 235
Re: 4 year tax break
Sorry forgot to say when you apply for your ird no thats when you make the choice of taking the 4 year tax break or family assistance
May 22nd 2007, 10:17 pm
#5
Here in Dunedin
Joined: May 2003
Location: Dunedin
Posts: 1,975
Re: 4 year tax break
Any UK investment income will still be liable to UK tax.
Practically speaking for interest and dividends any UK non-resident withholding tax deducted is likely to be the limit of your liability.
Practically speaking for interest and dividends any UK non-resident withholding tax deducted is likely to be the limit of your liability.
May 23rd 2007, 9:22 am
#6
Forum Regular
Thread Starter
Joined: Oct 2004
Posts: 104
Re: 4 year tax break
Thanks for the replies, really helpful.
Southerner, from what i have read if you are a resident overseas you can fill in an R105 form and give it to your bank, then you will not have to pay tax on your interest in the UK, the bank will not deduct the tax as they usually do. If not you can stick it in an offshore account and pay no tax there.
Southerner, from what i have read if you are a resident overseas you can fill in an R105 form and give it to your bank, then you will not have to pay tax on your interest in the UK, the bank will not deduct the tax as they usually do. If not you can stick it in an offshore account and pay no tax there.
