Source: Ministry of Business, Innovation and Employment (NZ) www.business.govt.nz
Do you have overseas accounts and investments?
If you have an account with an offshore financial institution, including banks and accounts maintained with certain offshore trusts, upcoming changes will see information about your overseas investments being shared with the IRD.
What you need to know
New Zealand is one of 105 countries and territories that has committed to sharing financial account information to combat global tax evasion. These laws have been in place since 1 July 2017.
From August 2018, the government will receive information about New Zealand tax residents with offshore financial accounts from other countries' financial institutions.
If you have an account with an overseas financial institution (including certain offshore trusts) you'll be required to confirm and disclose your tax residence status and tax identification number (TIN) with the overseas financial institution. This financial account information will be exchanged and will help the IRD verify that everyone is paying the correct tax on these overseas investments.
What you need to do
You have an opportunity to make sure your tax affairs are in order before the IRD receives the first automatic exchange from August 2018 onwards.
If you think there is an error in your tax affairs, the IRD encourages you to voluntarily disclose it before they identify the error. You make like to consider taking out audit insurance if you are concerned.
Things to think about
International tax laws are complex, and the way they are applied can depend on your specific circumstances and the different jurisdictions involved.
If you're a tax resident in New Zealand and another country or territory, or you earn foreign sourced income, you're subject to the tax laws of each. If both of those countries or territories tax their residents on worldwide income, or withhold tax on income earned, you could be taxed twice on the same income.
Double tax agreements (DTAs) have been negotiated between New Zealand and many other countries and territories to decide which country or territory has the first or sole right to tax specific types of income.
The fact that the income is taxed in the source country doesn't necessarily mean you'll avoid paying tax on that income in New Zealand. Income from overseas is calculated applying the New Zealand rules, not the rules of the country where the income came from.
Foreign income (even if deposited in an offshore account or left on a foreign credit card) does not need to physically come into New Zealand to be taxed here.
There are cases when you need to attribute foreign company income before a dividend is declared by the foreign company.
A distribution/gift from an offshore trust might be taxable in New Zealand even if that distribution/gift isn't subject to tax in the source country.
If you pay interest offshore, eg on offshore bank/credit card/mortgage accounts, you need to pay non-resident withholding tax (NRWT) in New Zealand. You might also need to account for foreign exchange profits/losses on foreign mortgages annually, rather than when that mortgage is repaid.
This is a complicated area and we strongly recommend you contact us if you fall into any of these categories. You may not have previously realised the implications of offshore investments on your New Zealand tax return. This being the case, it is important that you voluntarily declare it before the IRD receive this information directly, otherwise you are likely to be subject to IRD investigations in the future.