UK expats and migrants who are NZ tax residents must return overseas sourced income unless they qualify for transitional residency status (i.e. four-year foreign income exemption – find more information here.)

There are, however, two exemptions to the rule, which include foreign employment and foreign personal services income. This means, for example, that if the UK expat/migrant continues to receive UK employment or personal services income after arriving in NZ, they might still be required to return this income in their NZ income tax return.

The NZ income tax treatment for foreign-sourced income can also differ from the income tax treatment of NZ sourced income. Here are a few examples:

• Interest expense limitation on residential rental does not apply to UK properties
• UK superannuation withdrawal may be subject to the foreign superannuation withdrawal rules
• Foreign dividends may be taxed under the foreign investment fund rules
• Foreign denominated loans may be subject to the financial arrangement rules

If foreign income had been omitted in the past years, the return of foreign income to IRD for the relevant period might result in IRD imposing both use of money interest and penalties.

Our team can advise if the UK expat/migrant has NZ income tax filing obligations and if he/she qualifies for the four-year foreign income exemption.

Suppose the UK expat/migrant has an NZ income tax filing obligation, we can determine whether a double tax treaty exists for the relevant country to eliminate double taxation on the same income. If it does exist, we can consider and apply the appropriate article(s) and advise who has the first taxing right and who should claim the foreign tax credits. We can also view the foreign tax paid and calculate the maximum foreign tax credits claimable in your NZ income tax return to ensure you are not overpaying NZ tax.

If the UK expat/migrant qualifies for the four-year foreign income exemption, we can assist with tax planning so an informed decision can be made to keep or dispose of the foreign assets and investments before transitional residency status expires.

Where foreign income had been excluded in past years, we can help with the preparation and submission of a voluntary disclosure letter to the Inland Revenue and request for the remission of penalties and possibly interest dependent on the circumstances of the case.

If you need assistance with tax implications on foreign income, tax planning before foreign income exemption expires or “catching-up” omitted overseas income in past years, get in touch with our team, who can advise how we can assist and add value.

Please refer to our people for more information on who we are, our experience and how we can help.

We offer a free no-obligation consultation where we can discuss

• Your overseas income and investments;
• highlight issues and opportunities; and
• how we can add value and assist.