Moving to New Zealand? The US Tax Considerations

During the year to date, we’ve noticed a marked uptick in the volume of new migrants moving from the US and settling for a new life in New Zealand. Of course, New Zealand can be a very attractive place to settle, however one consideration that must be made is the tax impact.

One of our key services here at The US Tax Team, is pre-migration US tax advice. We assist large numbers of US citizens with the tax impact of their move, and how to avoid unwanted complications or tax traps.

In our short article today, we’ll discuss some of the key issues to think about.

Do New Zealand and the United States have a Double Tax Treaty?

They do indeed. New Zealand and the United States signed a double tax agreement in 1983, and amended this in 2008, with some protocols in between.

The tax treaty covers many (but not all) types of income, to prevent double taxation where possible.

The double tax treaty comes into practice for almost every item of US tax advice we provide at The US Tax Team New Zealand, and will heavily be relied upon with your future US tax returns.

You may access the NZ US DTA here.

Will the US Tax my KiwiSaver

Creating a retirement plan in one country, doesn’t always work out beneficial if you expect to retire in another.

This can certainly be the case when discussing New Zealand and the United States. Contributing to a KiwiSaver can not only have complex US tax filing obligations, but without the right US tax planning, they can also be subject to punitive US tax rates.

Obtaining good US tax advice at the beginning of your move to New Zealand can help minimise some of the issues around KiwiSaver.

Will NZ Tax my IRA or 401k

Similar issues can exist for Roth IRAs, Traditional IRAs and 401ks. In certain situations, it can be beneficial to retain these even after your move to the US, however again, obtaining good US tax advice is essential here. In addition, The US Tax Team work with expert New Zealand tax specialists, to ensure a full circle approach in understanding both the NZ and US tax obligations of these accounts.

Can I Work Remotely In New Zealand for my US Employer?

Yes, this is exceptionally common nowadays, but can mean that Social Security tax is still owing on W-2 wages in the US.

However, the NZ US tax treaty does potentially change the country where you’ll pay tax on this income. This is dealt with through Article 7 of the NZ US DTA, along with Article 15. These articles specify which country tax should be paid to on business income, or 1099 income. There are specific conditions which need to be met, which then switch the country in which tax needs to be paid.

Of course, this is something we provide US tax advice on frequently, and can help the move be as smooth as possible.

US Tax on Self-Employment

Working in New Zealand in any form of self-employment capacity can result in self-employment tax (social security) being owed in the US.

There are methods to plan for this, and see if any other options are available.  Discussing with your US tax accountant and receiving good US tax advice can be hugely beneficial in this instance.

US LLCs after Moving to New Zealand

There can be significant New Zealand tax complications for those who own US LLCs, whilst in NZ. In many cases, the disregarded status of an LLC (single member) may not be the same in New Zealand, and in addition, the LLC may not be eligible for the New Zealand transitional tax residency period.

We see this frequently for those who own rental properties, through an LLC, in the US. We can provide excellent NZ tax advice referrals, and also offer joint consultations for NZ US Tax advice in a single meeting.

Can I Keep My US Rental Property Once I move to New Zealand?

Yes, you certainly can, however this is where the NZ US double tax agreement comes into play. There may well be tax implications in New Zealand, along with the US. This is something we advise on frequently, to help clients keep their US assets in a tax efficient manner.

Summary

As you can see above, there are various nuances to taxation when moving from the US to New Zealand. We’re always pleased to see clients obtain US tax advice early, as it is far more beneficial to ensure a smooth transition into the NZ tax system, as opposed to fixing issues years down the line.

Here at The US Tax Team New Zealand, we provide specialist US tax advice, with the aim of reducing ongoing accountancy fees, complexity and tax liability. Reach out to us today at info@usatax.nz