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

However, there are two exemptions to the four-year foreign income exemption rule, being foreign employment and foreign personal services income. This means if the US expat/migrant continues to receive foreign employment or personal services income after arriving in NZ, they may still need to return this income in their NZ income tax return.

Further, the NZ income tax treatment for overseas sourced income can be different to the income tax treatment of NZ sourced income. We list out some examples below.

• Foreign dividend may be taxed under the foreign investment fund rules
• Foreign superannuation withdrawal may be subject to the foreign superannuation lump sum withdrawal rules
• Interest limitation does not apply to properties situated outside NZ

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

Upon arrival in NZ, we can advise whether the US expat/migrant has NZ income tax filing obligations and whether he/she qualifies for the four-year foreign income exemption.

If the US expat/migrant has a NZ income tax filing obligation, we can advise whether a double tax treaty exists for the relevant country to eliminate double taxation on the same income. If a double tax treaty exists, we can consider and apply the relevant article(s) and advise which country has the first taxing right and which country should claim the foreign tax credits. We can also consider 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 US expat/migrant qualifies for the four-year foreign income exemption, we can assist with tax planning so you can make an informed decision to whether keep or dispose of the overseas assets and investments before the foreign income exemption expires.

Generally, US citizen still needs to file an US income tax return after leaving US as US tax is on citizenship instead of tax residency basis. In preparing a NZ income tax return, we may need to fetch a copy of the US income tax return. Members of our team have worked in a US tax specialist firm so are familiar with individual US income tax return.

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

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 help with returning overseas 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.