If you are a New Zealand resident for tax purposes, you will be taxed in New Zealand for all of your “worldwide income”. This includes income derived from New Zealand and from other countries.
Overseas income also called it as foreign sourced income. Section BD 1 subsection 4 of ITA 2007 describes the meaning of foreign sourced income as
An amount of income of a person is non-residents’ foreign-sourced income if—
(a) The amount is a foreign-sourced amount; and
(b) The person is a non-resident when it is derived; and
(c) The amount is not income of a trustee to which section HC 25(2) (Foreign-sourced amounts: non-resident trustees) applies.
Your foreign sourced income may include:
- An amount of interest you have earned from funds in off shore bank accounts.
- Rental income
- Salary and wages paid both by New Zealand and offshore companies.
- Foreign pensions.
If you are receiving foreign income which is also taxed in another country, you may be entitled to tax credit for the tax you already paid. The available tax credit is limited to the lesser of the tax:
- Payable in New Zealand on the overseas income, or
- Paid offshore.
If you are tax resident in New Zealand and in another country that means you are subject to tax law of both the countries.
If both countries are taxing their residents on worldwide income then you will be charged tax twice on same income. Double tax agreements (DTAs) have been negotiated between New Zealand and many other countries to decide which country has the first or sole right to tax specific types of income. Section BH 1 of ITA 2007 explains DTAs.