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Four years in which New Zealand doesn't tax your foreign income

Whoever becomes a tax resident of New Zealand for the first time automatically gets forty-eight months of exemption on almost all of their foreign income. You don't have to apply for anything, you get it only once — and a single application can end it in one stroke.

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Written and checked by Auke on , against the sources at the bottom. Is something no longer right? Report it below and I'll fix it.

As a new resident of New Zealand you get a temporary tax exemption of about four years on almost all your foreign income: interest, dividends, rent and investment funds. Someone with this exemption is called a transitional resident: a resident in the transition period.

It is the most favourable arrangement you will come across in this whole journey, and it appears in virtually no Dutch emigration guide. Three things to know in advance:

  • You get it automatically.
  • You get it only once in your life.
  • A single application for the family tax credit ends it.

Who gets the exemption?

You are a transitional resident if you:

  • become a New Zealand tax resident on or after 1 April 2006, and
  • were not a New Zealand tax resident at any time in the ten years before, and
  • have never been a transitional resident before.

If you meet those, you get the exemption automatically. There is no form, no application and no assessment. For the average Dutch person moving to New Zealand for the first time, that is simply the case.

The exemption starts on the first day you are a tax resident and ends four years after the end of the month in which you met the conditions: more than 183 days of presence in twelve months, or a permanent place of abode in New Zealand. And you can get it only once in your life. If you come back later, it is used up.

Item Rule
Prior condition 10 years not a New Zealand tax resident
Duration until 4 years after the end of the month you became a tax resident
Start the first day as a tax resident
Number of times once in your life
Ended by applying for Working for Families, also by your partner
Exempt foreign interest, dividends, rent, FIF income
Not exempt wages and personal services abroad
FIF threshold afterwards NZ$ 50,000 cost, individuals
Tax year 1 April to 31 March

What does and doesn't fall under it?

Exempt is most of your foreign income from capital:

  • interest on foreign accounts
  • dividends from foreign shares
  • rental income from your Dutch home
  • income from foreign investment funds (the FIF income, see below)

A lump-sum withdrawal from a foreign superannuation fund has its own four-year rule, with the same period calculation.

Not exempt is income from work. Wages and income from personal services that you earn abroad remain taxed as usual. So it is about capital, not labour. If you work in New Zealand, that income is New Zealand income anyway and falls outside this arrangement.

Note what this means for your Dutch pension. Under the tax treaty private pensions and annuities are taxable only in your country of residence, in this case New Zealand. Discuss with a tax adviser how those payments relate to the exemption before you start drawing them. Your AOW is a different story: it stays taxed in the Netherlands as long as you are not a New Zealand citizen.

Rather have everything for New Zealand on one list?

Then we'll send you the departure checklist for New Zealand, with every step in order, and five mails about the pitfalls and the real costs. You can switch it off at any time.

We use your address, and your departure date if you fill it in, only for the checklist, the guide and the mails after it. You can unsubscribe under every mail.

Which choice ends the exemption?

Here is the catch, and it is one that affects families. If you apply for Working for Families, the exemption ends. Working for Families is the New Zealand family tax credit, including Best Start (the payment for young children). That also applies if your partner applies for it while they themselves are a transitional resident.

The same happens if you include exempt income in your return anyway, or tell Inland Revenue (New Zealand's tax authority) you no longer want to be a transitional resident. That choice cannot be reversed.

So you cannot combine the two, and you have to choose. The sum is different for each household:

  • Little foreign capital, but children? Then Working for Families is almost always the better choice: the exemption yields you little.
  • A rented-out home in the Netherlands, or an investment portfolio? Then the exemption can be worth more per year than the family credit, and for four years.

Work it out before you apply for anything. An application you make "just to see" what comes out can cost you the exemption.

What happens after those four years?

Put the end date in your diary the moment you arrive. From the day after, you pay New Zealand tax on your worldwide income. The most important rule there is the FIF regime for foreign investments (FIF stands for foreign investment fund).

The main rule: if as an individual you hold less than NZ$ 50,000 at cost in foreign shares and funds, you do not have to calculate FIF income. Above that, you are taxed annually under one of the permitted methods, such as the fair dividend rate (tax on a fixed percentage of the value) or comparative value (tax on the actual change in value). This is in principle on an attributed income, even if you received nothing.

In practice that means: know before the window closes whether you are above NZ$ 50,000, and then get advice on the method that is most favourable for your portfolio. It is a choice that follows you for years.

When does the tax year run?

One more detail that confuses the first year: the New Zealand tax year runs from 1 April to 31 March. It does not coincide with the Dutch calendar year, and it does not coincide with your arrival date either. In the year of your move you therefore deal with two systems and two calendars.

In Vertrekklaar this is phase 1 of 5 of the journey, step 1.2: the same steps, but for your situation — in your order, tickable, and with the deadlines watched. See the whole journey to New Zealand or go straight to step 1.2 in the open plan.

Want to know more about this?

Then we'll send you the departure checklist for New Zealand, with every step in order, and five mails about the pitfalls and the real costs. You can switch it off at any time.

We use your address, and your departure date if you fill it in, only for the checklist, the guide and the mails after it. You can unsubscribe under every mail.

What this rests on

The facts in this article come from these official pages. Rules change. When in doubt, go by the source, not this article.

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