New Zealand income tax act only taxes tax residents on their worldwide income irrespective of the source of that income and taxes non-residents only on income which is derived from New Zealand.
According to s YD1, individuals are New Zealand residents if they:
• Have a permanent place of abode in New Zealand; or
• Are in New Zealand for more than 183 days in any 12 month period; or
• Are away from New Zealand in the service of the New Zealand Government.
Individuals cease to be New Zealand residents if they:
• Are absent from New Zealand for more than 325 days in any 12 month period; and
• During that period of absence have at no time a permanent place of abode in New Zealand; and
• Are not absent in the service of the Government of New Zealand.
Companies are resident:
- If they are registered in New Zealand
- Permanent place of establishment in New Zealand
When you become a Tax Resident of New Zealand:
A natural person becomes a New Zealand resident if one of the below conditions is satisfied:
- 183 days in New Zealand (YD1(3)(4)(8) Income Tax Act 2007)
You will become a New Zealand resident if you have been in New Zealand for more than 183 days in a total 12-months period. Present for part of a day in New Zealand will be counted as a whole day of the present.
You will be treated as a resident from the first of the 183 days.
- Permanent place of abode in New Zealand (YD1 (2) Income Tax Act 2007, CIR v Diamond  NZCA 613 )
You will become a New Zealand resident if you have a permanent place of abode in New Zealand, even if you also have a permanent place of abode elsewhere.
A permanent place of abode is an available dwelling where you usually live, or somewhere you can call “home” in New Zealand. A rented home, home of a relative or friend could also be your home.
- Government servants (YD1 (7) Income Tax Act 2007)
Regardless of the above, you are a New Zealand resident if you are working overseas for the NZ government.
Tax on income: Being a New Zealand tax resident, you will be taxed for your worldwide income unless you satisfy the provisions under section HR 8 for transitional residents. You can claim the tax credits from the taxes paid for your foreign-sourced income.
Double tax agreement tie-breaker tests: In the cases that you have a permanent place of abode in both New Zealand and other countries, the tie-breaker tests are applied to determine the country of residence. The tests are looking at your connections to the countries. Such connections can be homes, families, work, economic, habitual abode, etc.
When you become a Non-Tax Resident of New Zealand:
A natural person ceased to be a New Zealand resident if one of the below conditions is satisfied:
- 325 days outside New Zealand (YD1 (5) Income Tax Act 2007)
You will become a non-resident of New Zealand if you have left New Zealand for more than 325 days in a total 12-months period. Present for part of a day in New Zealand will be counted as not absent for that day.
You will be treated as a non-resident from the first of the 325 days.
- Non-Resident Seasonal Workers (YA1, YD1 (11) Income Tax Act 2007)
This includes the recognised seasonal employer (RSE) on a Recognised Seasonal Employer Limited Visa and the foreign crew of fishing vessels on a Fishing Crew Work Visa. 183 days rules do not apply in this case.
Tax to NZ sourced income: Being a non-resident you will be taxed on all New Zealand sources of income according to section YD4. New Zealand sources of income include below:
- Income derived from a New Zealand business
- Contracts made or performed in New Zealand
- Personal services in New Zealand
- Accident compensation payments
- Income from land owned in New Zealand
- Income from use in New Zealand of personal property
- Income from debt instruments
- Income from disposal of New Zealand property
- Beneficiary income
- Income from air/sea transport
- Premium paid to non-resident insurers (sourced in New Zealand)
- Income from New Zealand partnerships
- Income through a permanent establishment