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Tax Residency Changes for Visitors – What You Need to Know 

Who is affected by this change: 

  • New Zealand visitors

    • Specifically: Tax residents and non-resident visitors 

Why are these changes happening

  • Reduce the risk of double non-taxation of income 

  • Make remote work in New Zealand for visitors easier 

To be considered a tax resident, they will have to own a permanent place of residence in New Zealand, or if they are physically in New Zealand for at least 183 days within 12 months. This is called the 183-day rule. When this rule is applicable, they will be considered a tax resident from the day of their arrival. 

Tax residents are taxed on their income worldwide, meaning any income a resident earns, whether inside or outside New Zealand, will be taxed. 

Key changes in this change 

  • A clear definition of a “non-resident visitor.”

  • An exemption for non-resident visitors from the 183-day rule. 

  • A non-resident visitor will be considered a tax resident if they remain in New Zealand for longer than 275 days(or if they are residing in New Zealand unlawfully) 

Definition of a “non-resident visitor.”

  • Present in New Zealand for 275 or fewer days within an 18-month period, including their arrival and departure days. 

  • Not a New Zealand resident or a transitional resident immediately before qualifying.

  • Not taking work in New Zealand that:

    • Is for a New Zealand resident or a branch of a non-resident 

    • Offers goods and services in New Zealand in exchange for income from businesses or people. 

    • Needs them to be physically in New Zealand for work.

  • They must not be receiving any family scheme payments, nor their partner. 

  • Must be present in New Zealand lawfully under the Immigration Act 2009

  • Must be a tax resident in another country that imposes a substantially similar income tax system under the ITA

275-day count test 

  • Must not be physically in New Zealand and not a resident before becoming a non-resident visitor.

  • A person must not be present for more than 275 days within an 18-month period, or they will no longer meet the requirements to be a non-resident visitor.

  • If these criteria are broken or not met, they will transition into the existing tax rules. 

Limitations on type of work undertaken by non-resident visitor 

  • Cannot work for a New Zealand employer 

  • Cannot exchange goods and services for income from New Zealand businesses or people.

  • The work must not require the person to be physically present in New Zealand to work.

If these do not apply:

  • A person can apply for an appropriate visa

    • Business visitor visa(Three months), etc

  • They will not have the non-resident visitor exemption 

Work involving the promotion of goods, services, or experiences 

  • Non-resident visitor

    • Must not need to be present in New Zealand for promotion

    • Cannot promote New Zealand businesses while present in New Zealand 

Lawfully in New Zealand for New Zealand immigration purposes 

  • Must be lawfully present in New Zealand for the period of their non-resident visitor status.

  • If a person's status changes to an unlawful presence in New Zealand, they will no longer be a non-resident visitor. 

    • When the status of a non-resident visitor is revoked because of an unlawful presence, the existing resident tests will apply, ignoring that they were ever a non-resident visitor.

    • If the 183-day rule was breached by applying the existing resident tests, they will be treated as a resident from their arrival day in New Zealand. 

  • A person must leave New Zealand before their presence becomes unlawful to avoid this outcome.

  • If they are unlawfully present in New Zealand, they have an obligation to leave New Zealand. 

Tax resident in another jurisdiction

  • A person must be a tax resident in another jurisdiction

  • If a person is no longer a tax resident in another jurisdiction during their visit to New Zealand, they will no longer be a non-resident visitor, and tax resident rules will apply. 

Exclude other persons subject to existing rules 

  • Certain persons visiting New Zealand for a short period of time have their own rules for tax residence and income, according to ITA. 

  • The earnings from public entertainers will be excluded from the proposed income tax exemption. 

  • If visiting entertainers and sportspersons are needed in New Zealand to work, they will be treated as tax residents, and existing tax rules will apply. 

183-day rule does not apply to non-resident visitors 

  • The 183-day rule does not apply to persons when they are determining the person’s New Zealand tax residence under section YD 1(3).

  • The residence exemption only applies to section YD 1(3) and doesn’t interfere with other residence tests. It also doesn't interfere with the permanent place of abode rule in section YD 1(2). 

  • This rule is the main rule when determining tax residence for a natural person 

Person ceases to be non-residence visitor

  • If a non-resident visitor stays in New Zealand longer than 275 days within an 18-month period, they may cease to be a non-resident visitor. 

  • When a person is no longer a non-resident visitor, the existing tax rules apply to said person. 

  • Tax treatment will depend on whether or not they are lawfully present in New Zealand for immigration purposes. 

New Zealand residence on prospective basis

  •  If a person’s non-resident visitor status gets revoked while being lawfully in New Zealand, the existing tax rules will apply on the date it happens, on a prospective basis.

  • If a person acquires a permanent place of residence, they will be considered a New Zealand resident from that day on.

    • The residence test that is most probable to apply is the 183-day rule, with the previous days spent physically in New Zealand as a non-resident visitor counting.

  • If a person breaches the 275-count test, they will no longer be a non-resident visitor and will be considered a New Zealand resident on a prospective basis because of the 183-day rule.

  • If a person does not continue to qualify to be a non-resident visitor because they breached one of the criteria under the new proposed section YD 1B(4), and the 183-day rule is not satisfied. The person will continue to be a non-resident visitor under the existing rules. 

  • When a person stops being considered a non-resident visitor, the tax residence the person has will go through any entities associated with the person. 

  • Only under the ITA will this prospective treatment apply, and it will not apply to other residence rules in other acts. 

New Zealand residence on retrospective basis 

  • A non-resident visitor is required to be lawfully present in New Zealand under the Immigration Act 2009. 

  • If the non-resident visitor becomes unlawfully present in New Zealand, they will no longer have the status of a non-resident visitor and will be treated as if they were never a non-resident visitor. 

  • Retrospective residence is to keep the integrity of New Zealand’s immigration and tax rules. 

  • Time spent as a non-resident visitor in New Zealand will be counted towards existing rules. 

  • If the 183-day rule is satisfied with the time present, the existing rule in section YD 1(4) will apply, and they will be treated as a New Zealand resident from the day of arrival. 

Existing tax rules would apply to person ceasing to be non-resident visitor

  • When a person is no longer considered a non-resident visitor, existing tax rules will apply. The outcome of the rules will depend on the circumstances. 

  • If a person meets the requirements to be a transitional resident and they have ceased to be a non-resident visitor, they are able to become a transitional resident. 

  • A person can be entitled to an income tax exemption if that person ceases to be a non-resident visitor, they are present in New Zealand for less than 92 days, and they meet the conditions for the exemption in section CW 19. The days spent as a non-resident visitor will be counted towards the 92 days. 

  • A person may be relieved under the relevant DTA. 

Exclusion from family assistance 

  • Under the new section YD 1B(2)(f), entitlement to working for families tax credits cannot be received by a non-resident visitor, their spouse, civil union partner, or de facto partner.

  • This will ensure that they do not claim an income tax exemption at the same time they, their spouse, civil union partner, or de facto partner receives family assistance payments. 

Why these changes are good

  • It allows visitors to stay in New Zealand for a longer period without being considered a tax resident.

  • Provides a clear understanding and definition of a “non-resident visitor”.

  • Helps prevent double non-taxation.

  • Keeps integrity and fairness in the tax system. 

New Zealand Tax Accountant.