New Zealand Income Tax

Income Tax

Taxation of international executives

Related content

All income tax information in this section is summarized by KPMG, the New Zealand member firm of KPMG International, based the Income Tax Act 2007.

Tax returns and compliance

When are tax returns due? That is, what is the tax return due date?

An annual income tax return (if required) is due on 7 July.

Taxpayers who have a filing extension with an agent are required to file returns by 31 March the following year. In practice, the majority of executives are likely to be required to file tax returns.

Terminal taxes are payable by 7 February of the following year (or 7 April for taxpayers with a filing extension). Interest and penalties may apply to late payment of taxes owing. Taxpayers with income that has not had New Zealand tax deducted at source may be liable to make tax payments in instalments throughout the year (provisional tax).

What is the tax year-end?

The tax year is to 31 March.

What are the compliance requirements for tax returns in New Zealand?  


Taxpayers who derive income other than income that has tax withheld at source, or who are non-resident for part of the income year, will be required to file a tax return.

Taxpayers who derive income only from employment, interest, or dividends that have tax withheld at source during the income year are not required to file an annual income tax return, provided the correct withholding deductions are made. If the Inland Revenue knows that a taxpayer has not had the correct amount of tax deducted, then the Inland Revenue will send the taxpayer a personal tax summary, setting out the taxpayer’s correct tax liability. In certain circumstances, a taxpayer who does not receive a personal tax summary, but who knows that they have not had enough tax deducted is required to request a personal tax summary from the Inland Revenue and arrange for it to be corrected.


Non-residents are required to file an annual tax return if they have income that is New Zealand sourced.

Interest and dividends sourced in New Zealand and paid to a non-resident are subject to non-resident withholding tax (NRWT). As NRWT is usually a final tax for non-residents, a tax return is not usually required if these are the only forms of income received from New Zealand sources.

Tax rates

What are the current income tax rates for residents and non-residents in New Zealand?


Both residents and non-residents are taxed in general using a tiered rate table as follows.

Income tax table for 2015 tax year to 31 March 2015

Taxable income bracket

Total tax on income below bracket Tax rate on income in bracket
From NZD To NZD NZD Percent
0 14,000 0 10.50
14,001 48,000 1,470 17.50
48,001 70,000 7,420 30.00
70,001 Over 14,020 33.00

An Accident Compensation Corporation (ACC) Earners' Levy at the rate of 1.70 percent is also imposed on employment income up to a maximum of NZD116,089 to fund the accident compensation scheme for the 2012 income year.


A non-resident is subject to New Zealand tax only on income earned or sourced in New Zealand (regardless of where paid). The tax rates applying generally are as set out above for resident taxpayers.

Double tax agreements may apply to exclude or limit the amount of tax payable on certain income earned by non-residents.

Non-resident withholding tax is imposed on every person who derives non-resident withholding income such as interest and dividends. NRWT is generally a final tax on such income.

Non-resident withholding tax is imposed on interest at 15 percent, and dividends at 30 percent or 0 percent if fully imputed. These rates might be reduced further through the application of a double tax agreement if the recipient is resident in a country with which New Zealand has entered into such an agreement.

Approved Issuer Levy (AIL) can be applied instead of NRWT on payments of interest to a non-resident, provided they are not associated with the payer. AIL is imposed as a levy at the rate of 2 percent and satisfies the tax obligations of the taxpayer in New Zealand, however cannot be used as a tax credit in overseas jurisdictions. AIL at 0 percent may be available in certain circumstances.

Residence rules

For the purposes of taxation, how is an individual defined as a resident of New Zealand?


A New Zealand resident taxpayer is taxable on their worldwide income. For income tax purposes a resident individual is defined as a person:

  • who has a permanent place of abode in New Zealand or
  • is personally present in New Zealand in excess of 183 days in any 12-month period (note that any part days of physical presence in New Zealand is included as days present in New Zealand).

A prerequisite for the existence of a permanent place of abode is having an available dwelling in New Zealand.  This dwelling does not need to be directly owned by the taxpayer to be considered available for the purposes of this test.  In addition, for a property to be regarded as available it is not necessary that it be vacant or able to be occupied immediately.

Where an individual has an available dwelling in New Zealand, in order to determine whether the dwelling will be considered a permanent place of abode, there are two key considerations; the continuity and duration of the individual’s presence in New Zealand and the durability of the individual’s association with the property. The following factors would be considered in addressing the level of an individual’s connection with a property:

  • nature and use of the dwelling
  • intentions
  • family and social ties
  • employment, business and economic ties
  • personal property
  • other “relevant” factors, e.g. receipt of Government assistance, whether holidays are spent in New Zealand

Determination of a permanent place of abode is a question of fact and varies from person to person.

As determination of residence is a key factor in determining your tax obligations, KPMG in New Zealand recommends that you seek professional advice based on your specific circumstances.

Is there a de minimus number of days rule when it comes to residency start and end date? For example, a taxpayer can’t come back to the host country for more than 10 days after their assignment is over and they repatriate.

A person who is physically absent from New Zealand in excess of 325 days in any 12-month period is deemed not to be resident in New Zealand from the beginning of that period of absence, provided they have no permanent place of abode in New Zealand. Therefore a taxpayer cannot come back to the host country (New Zealand) for more than 39 days in the 12-month period following departure in order to meet the days test for non-residence from their departure date.

Whether you remain a New Zealand resident will depend upon your individual circumstances.

What if the assignee enters the country before their assignment begins?

You will be a resident for New Zealand tax purposes if you spend more than 183 days in any 12-month period in New Zealand or if you have a permanent place of abode in New Zealand. You will become a New Zealand tax resident from the first day in the 12-month period that you gain residency. This means that any prior trips to New Zealand before your move to New Zealand may cause you to become a tax resident from the date of the prior visit.

Transitional residents

People who have not been tax resident in New Zealand for at least 10 years and return or move to New Zealand will be a transitional resident for New Zealand tax purposes. A person may only be a transitional resident once during their lifetime.

The general requirements for being a transitional resident are as follows:

  • the individual is resident in New Zealand
  • for a continuous period (the non-residence period) of at least 10 years ending immediately before the individual satisfies the requirements of the determination of residence other than company for becoming resident in New Zealand, the individual:
    1. did not satisfy the requirements for being resident in New Zealand
    2. was not resident in New Zealand.
  • the individual has not been a transitional resident before the non-residence period
  • the individual has not ceased to be a transitional resident after the end of the non-residence period.

A transitional resident is taxed only on their New Zealand-sourced income, and any overseas employment or business income. This exemption from tax on most foreign-sourced income will apply for 48 months from the date of New Zealand tax residence(the exemption period may extend to up to 54 months depending on when a New Zealand permanent place of abode arises).


A person who is physically absent from New Zealand in excess of 325 days in any 12-month period is deemed not to be resident in New Zealand from the beginning of that period of absence, provided they do not have a permanent place of abode in New Zealand.

Termination of residence

Are there any tax compliance requirements when leaving New Zealand?

There are no special procedures on termination of residence.

A return must be filed by a person who is non-resident for part of the tax year. Therefore, all taxpayers are required to file a tax return for the tax year in which they cease to be a tax resident in New Zealand.

What if the assignee comes back for a trip after residency has terminated?

After residency has been terminated (that is, the taxpayer has been physically absent from New Zealand for more than 325 days) a taxpayer cannot come back to the host country for more than 183 days in any 12 months. If the 183-day period is exceeded the assignee could be regarded as being a resident from the first day of their arrival into New Zealand.

Communication between immigration and taxation authorities

Do the immigration authorities in New Zealand provide information to the local taxation authorities regarding when a person enters or leaves New Zealand?

Such information could be obtained if IRD requested it. The New Zealand Government is exploring options for greater information sharing between its various agencies.

Filing requirements

Will an assignee have a filing requirement in the host country after they leave the country and repatriate?

Yes, the assignee will have a filing requirement in the host country if they have income sourced in their host country.

Economic employer approach

Do the taxation authorities in New Zealand adopt the economic employer approach1 to interpreting Article 15 of the OECD treaty? If no, are the taxation authorities in New Zealand considering the adoption of this interpretation of economic employer in the future?

No. The New Zealand IRD does not currently have a policy statement on this matter and has historically focused on the actual employer. New Zealand legislation defines employer by reference to the person making a source deduction payment (that is a salary payment subject to Pay As You Earn (PAYE), or similar). This domestic interpretation would usually be carried into the interpretation of the Double Tax Agreement (in the absence of any specific definition). However, in light of an Australian ruling (December 2003) it is possible that IRD could adopt this approach in any particular circumstance. To date, the usual approach has been to treat the recharge as a management fee, potentially subject to New Zealand tax (and non-resident contractors’ withholding tax) as it relates to services performed in New Zealand. In the case of a direct recharge of cost, no taxable profit arises.

De minimus number of days

Are there a de minimus number of days2 before the local taxation authorities will apply the economic employer approach? If yes, what is the de minimus number of days?

As discussed in the answer to the question above, there is no IRD policy statement, or exposure draft, on this.

Types of taxable compensation

What categories are subject to income tax in general situations?

In general, all types of remuneration, monetary benefits, and housing received by an employee for services rendered constitute taxable income regardless of where paid. Typical items of an expatriate compensation package as follows are fully taxable unless otherwise indicated:

  • base salary
  • reimbursements of foreign and/or home country taxes
  • school tuition reimbursements
  • cost-of-living allowances
  • expatriation premiums for working in New Zealand.

Housing allowances and the gross value of housing provided directly by the employer are generally taxable to the employee. Exemptions from tax on housing benefits apply where an existing employee goes on a secondment with the intention that the secondment would not exceed 2 years.  This exemption does not apply to new employees.  If at any time the intention regarding the term of the secondment changes and it is expected to exceed 2 years, the accommodation will become taxable from the date of the change in intention.  The reverse situation where the period of assignment is reduced from greater than 2 years to below the 2 year threshold would likewise result in accommodation being treated as exempt from the date of the change in intention.

In some specific circumstances, the tax exempt period may apply for up to 5 years.  This extended exempt period relates to certain capital projects (up to 3 years) and accommodation associated with rebuild work in respect of the Canterbury earthquake.

An exemption also exists in certain circumstances for employees with multiple workplaces who are required to work on an ongoing basis at a distant workplace.

Where aaccommodation provided to an employee is not subject to one of the specific exemptions, employer provided accommodation will be taxable to that employee, however the first three months of any housing or housing allowance paid is exempt from tax on the basis that it relates to their relocation.

Benefits-in-kind are generally subject to Fringe Benefit Tax (FBT) payable by the employer. Legislation allows employers to use FBT rates that correspond to the personal income tax rates of the employee receiving the benefit (with the top rate of FBT payable being 49.25 percent, based on the top marginal tax rate). The intention is to make employers indifferent from a tax perspective whether a benefit in kind is provided and FBT paid, or equivalent cash remuneration is paid to the employee. The FBT rate is set so an employer is indifferent between providing a net benefit-in-kind, or gross salary to enable the employee to purchase the benefit.

Tax-exempt income

Are there any areas of income that are exempt from taxation in New Zealand? If so, please provide a general definition of these areas.

  • Certain non-monetary benefits.
  • Certain cash allowances.
  • Certain transfer costs.
  • Contribution to a non-New Zealand-registered superannuation scheme.

Certain non-monetary benefits

Non-monetary benefits provided by the employer to the employee for services rendered are generally not taxable in the hands of the employee. However, these benefits are usually subject to FBT which is payable by the employer. Such non-monetary benefits include a company car, interest-free or low interest loans, discounted goods and services, free or subsidized travel for recreational leave and contributions to an overseas superannuation scheme, and so on. Discounted shares or share options packages do not fall within the FBT regime. Discounted shares granted or vested and share options exercised, while resident in New Zealand are taxable in the hands of the employee.

With effect from 1 April 2017 employers providing employee share benefits will have additional obligations.  Employers will be able to opt to apply the PAYE rules rather than individuals having to pay tax in their income tax returns.  Regardless of whether employers opt into the new rules or not, from 1 April 2017 there will be a requirement to provide information on the value of employee share benefits to the IRD. 

Certain cash allowances

Cash allowances are not taxable in the hands of the employee if they merely reimburse the employee for expenditure incurred on behalf of an employer. Common examples of reimbursement allowances are accommodation expenses for business travel (however see comments above re housing) and petrol allowances for business motor vehicle usage.

Certain transfer costs

When an employer requires an employee to transfer to a new location, reimbursement of the costs of relocation are generally exempt from tax. This exemption only extends to direct costs associated with an employee’s transfer.

The New Zealand IRD have issued a list of relocation costs that may be eligible as exempt from tax to provide clarity as to the type of expenditure that is exempt from tax.

Contribution to a non-New Zealand registered superannuation scheme

Where an employer makes a contribution to a non-New Zealand registered superannuation scheme (for example, a superannuation plan registered overseas), the contribution will be subject to FBT. Contributions made by an employer to a New Zealand-registered scheme may be subject to Employer Superannuation Contribution Tax (ESCT) at the employee’s marginal tax rate.

Prior to 1 April 2011, superannuation investments from which ESCT had been deducted were subject to a 5 percent withdrawal tax when the funds were withdrawn from the scheme (for example, when funds were withdrawn less than two years after the contributions were made).

Expatriate concessions

Are there any concessions made for expatriates in New Zealand?

No special exclusions from taxable income are available to expatriates residing in New Zealand apart from those relocation costs discussed above and the exemptions available for transitional residents.

Salary earned from working abroad

Is salary earned from working abroad taxed in New Zealand? If so, how?

Where a resident or transitional resident of New Zealand derives income while working overseas, that income will be taxable in New Zealand. If foreign taxes are paid while overseas, it is possible to claim a foreign tax credit for the foreign tax paid. The amount of the credit may not exceed the lesser of the amount paid in the country of source and the amount of New Zealand tax payable on that income. In addition, this credit will only be allowable to the extent that the foreign-source income would have been taxable had it been derived in New Zealand.

Taxation of investment income and capital gains

Are investment income and capital gains taxed in New Zealand? If so, how?

Investment income is taxable in New Zealand if it is derived by a resident (other than a transitional resident in the case of foreign sourced investment income), or has a New Zealand source.

There is no comprehensive capital gains tax in New Zealand; however some forms of capital gains are subject to income tax under specific provisions of the legislation. These include the following:

  • gains on the sale of real and personal property that was acquired with the purposes of resale or was generally acquired as part of a profit-making activity
  • gains on financial arrangements including any profit on realization and gains arising from foreign exchange fluctuations

Losses are subject to the normal tests of deductibility.

From 1 October 2015 new rules will apply to tax any gain on the disposal of residential property (other than an individual’s main home) where it is sold within two years of acquisition.    From 1 October 2015 buyers and sellers will also be required to provide a New Zealand IRD number at the time of any transaction.

Taxation of interest income

For a New Zealand resident, any interest you earn whether from New Zealand or overseas sources will be included in your taxable income and will be subject to tax at marginal rates. A tax credit is generally allowed for any overseas taxes paid on interest derived from overseas.

Transitional residents will only be subject to tax on New Zealand-sourced interest income at their marginal rate. Non-resident taxpayers will need to have non-resident withholding tax or approved issuer levy deducted from New Zealand interest paid to them.

Dividends, interest, and rental income

Taxation of New Zealand-sourced dividends

Dividends paid by New Zealand companies are subject to an imputation system. This means that dividend income carries with it credits resulting from tax paid by the company, which can be used by resident shareholders against their personal tax liability on the dividends.

Resident withholding tax is imposed on dividends to the extent that the dividend is not fully imputed (that is, the dividend does not carry the maximum allowed amount of imputation credits).

Gains on financial arrangements (such as bonds and debt securities) may be taxable under the financial arrangement rules. This includes foreign exchange gains on bank accounts, which could be taxable on a realized (cash) bash or unrealized (accrual) basis depending on the taxpayer's personal circumstances.

A non-resident is subject to non-resident withholding tax on any dividends received from New Zealand companies. The standard rate of non-resident withholding tax on dividends is 30 percent, but this may be reduced to 15 percent by a double tax agreement, and is automatically reduced to 0 percent to the extent that the dividend is fully imputed.

If dividends are your only New Zealand-sourced income and non-resident withholding tax has been correctly deducted, you will not need to file a New Zealand tax return.

Taxation of foreign-sourced dividends

Dividends paid by an overseas company will be taxable in New Zealand, unless the shares are subject to the Foreign Investment Fund (FIF) regime. Shares in non-New Zealand companies are generally subject to the FIF regime (discussed later).

Dividends paid by overseas companies to transitional residents or a non-resident are not subject to tax in New Zealand.

Taxation of rental income

Residents will be taxable on net rental property income derived from property, regardless of location. Where mortgage interest payments are made to a foreign lender, you may be required to withhold non-resident withholding tax or approved issuer levy from the interest payments made and pay this to the Inland Revenue.

Non-residents and transitional residents will only be taxable on net rental property income derived from property located in New Zealand.

Taxation of employee share purchase schemes

In general, the benefit of shares received under a share purchase or option arrangement as a consequence of employment is taxable in the hands of the employee.

The taxable benefit is calculated as the difference between the market value of the share received and the amount paid for the share. The trigger point for the tax liability is generally the point at which the employee acquires the share, whether by way of grant, purchase at a discount, or exercise of an option. The grant of options is not a taxable event. The tax liability arises upon exercise of the options, or when the option is sold.

If a transitional resident receives a benefit under an employee share option or purchase scheme, the value of any benefit may be reduced by an apportionment based on the transitional resident’s period of employment as a non-resident over the total period of their employment in relation to the scheme.

A non-resident receiving a share benefit is taxable in New Zealand to the extent that the benefit relates to New Zealand employment.

You should seek advice from KPMG in New Zealand on employee share purchase schemes.

Foreign investments

Resident taxpayers are subject to specific regimes to prevent New Zealand residents from sheltering income offshore. In many circumstances, income accumulated in a controlled foreign company (CFC) or a foreign investment fund (FIF) is taxed in New Zealand.

The CFC and FIF regimes are applicable even to entities which may have been created before you become New Zealand tax resident. Tax may be imposed on foreign income when it is derived by a resident or, in some circumstances, as it accumulates in a CFC or a FIF. The rules for determining whether a foreign entity is a CFC or a FIF are complex and KPMG New Zealand recommends seeking specific advice on the taxation of any investments held.

In general terms, a foreign company will be a CFC where five or fewer New Zealand residents hold in aggregate more than 50 percent of the (specified) control interests in the foreign company. A foreign company will also be a CFC where a single person resident in New Zealand holds a control interest of not less than 40 percent unless there is a non-associated, non New Zealand resident who has an equal or greater control interest in the foreign company. Interests in CFCs are taxed in New Zealand if the CFC derives more that 5 percent of its income from “passive” sources (such as certain dividends, interest, royalties and rents).

Subject to certain exceptions, an interest in a FIF is defined as shares in a foreign entity, a right to benefit as a beneficiary or member of a FIF superannuation scheme or a right to benefit from a policy of life insurance entered into outside New Zealand.

Several exemptions from the FIF rules exist including an exemption for certain shares in Australian resident companies listed on the ASX and a de minimis exemption for individuals with total FIF investments having an aggregate cost of NZD50,000 or less. FIF exempt investments are taxable on distributions and on disposal, if held on revenue account (e.g. purchased with the intention of resale).

Although there are several methods of calculating income under the FIF regime, the default method is the fair dividend rate (FDR) method. The FDR method assumes that a taxpayer earns income from the FIF investment equal to 5 percent of the investment's market value on the first day of the tax year. If the actual return from a taxpayer's total portfolio of FIF investments is less than 5 percent, then tax can usually be paid on the lower amount (losses are not deductible however

The majority of foreign superannuation schemes would not be considered to be FIF superannuation schemes.  If the foreign superannuation scheme is entered into while the taxpayer is a non-resident, the taxpayer has an exemption from tax on any withdraw for the first 4 years of New Zealand tax residence.  The most common method to tax the withdrawal after the 4 year exemption period is under the schedule method.  This method taxes a percentage of the withdrawal based on the time that the taxpayer has been a New Zealand tax resident.

Tax planning

Timing of payments

A gross-up of income in the year of departure is not required. Therefore, lower marginal tax rates may apply if an individual leaves New Zealand early in the income year, or arrives late in an income year.

Superannuation scheme benefits

As noted above, distributions from certain overseas superannuation schemes are generally taxable if received while a tax resident in New Zealand. As a general rule, if you expect to receive offshore pensions and superannuation benefits while a tax resident in New Zealand, KPMG New Zealand recommends that they should be reviewed and their tax status determined.

Gains from stock option exercises

Gains from stock options and discounted shares are generally taxable if the price paid for the share is less than the market value of the share at the time of acquisition of the share. Gains from the disposal of stock options received by virtue of employment are also generally taxable. The timing of exercise of options, or grant of shares, vis-à-vis becoming tax resident in New Zealand could determine whether the share benefit is taxable in New Zealand.

Foreign exchange gains and losses

Foreign exchange gains and losses arising on financial arrangements held by tax residents must be brought to account under the financial arrangements regime. Gains will be assessable. Losses will be deductible provided the interest deductibility criteria are met. Depending on the taxpayer's personal circumstances, gains might be taxable on a realized (cash) basis or unrealized (accrual) basis.

Principal residence gains and losses

Not applicable in New Zealand.

Capital losses

Losses are subject to the normal tests of deductibility. As New Zealand does not have a capital gains tax regime, capital losses are generally not deductible. Losses on financial arrangements might be deductible under the financial arrangement rules.

Personal use items

New Zealand does not allow deductions against employment income for private expenditure. Benefits-in-kind provided to employees are liable to fringe benefits tax (FBT) in the hands of the employer.

Reimbursement of expenditure incurred as a consequence of employment can generally be reimbursed by the employer without the employee being subject to tax on the reimbursed amount. The Inland Revenue has released a list of what relocation costs will be non taxable, such as the costs of finding a new property, moving personal effects, and immigration assistance.


There is no longer gift duty in New Zealand.

Additional capital gains tax (CGT) issues and exceptions

Are there additional capital gains tax (CGT) issues in New Zealand? If so, please discuss?

New Zealand does not have a comprehensive capital gains tax regime. Some forms of gain are subject to income tax under specific provisions of the legislation. These include:

  • gains on the sale of real and personal property that was acquired with the purposes of resale or was acquired as part of a profit-making activity
  • gains on financial arrangements including any profit on realization and gains arising from foreign exchange fluctuations.

Are there capital gains tax exceptions in New Zealand? If so, please discuss?

Pre-CGT assets

See section above.

Deemed disposal and acquisition

See section above.

General deductions from income

What are the general deductions from income allowed in New Zealand?

Generally, the only deductions available to most individuals are for expenditure relating to tax return preparation and premium on certain loss of earnings insurance.

Calculation of estimates/prepayments/withholding

How are estimates/prepayments/withholding of tax handled in New Zealand? For example, Pay As You Earn (PAYE), Pay-As-You-Go (PAYG), and so on.

An employer will generally be required to make deductions of income tax from salary and wages and remit those deductions to the Inland Revenue Department (either once or twice a month, depending on the size of the employer). These are referred to as Pay As You Earn (PAYE) deductions.

If an employer does not deduct PAYE, tax deductions become the responsibility of the employee and can be accounted for as an IR 56 taxpayer, where the employee makes regular payments to the Inland Revenue.

A taxpayer that has income that is not subject to source deductions, such as investment income, might be required to make installment payments (provisional tax) during the tax year.

When are estimates/prepayments/withholding of tax due in New Zealand? For example, monthly, annually, both, and so on.

A provisional taxpayer may be required to pay provisional tax during an income year. This is generally done in three installments.

A provisional taxpayer, for a tax year, is a taxpayer whose residual income tax for the tax year is NZD2,500 or more; or where a taxpayer makes an election to be a provisional taxpayer.

Relief for foreign taxes

Is there any Relief for Foreign Taxes in New Zealand? For example, a foreign tax credit (FTC) system, double taxation treaties, and so on.


A tax credit is allowed for foreign tax which is paid on any foreign-source income. The tax for which a credit is sought must be similar in nature to New Zealand income tax. The amount of the tax credit allowed cannot exceed the lesser of the amount of tax actually paid in the foreign jurisdiction, or the New Zealand tax liability on the foreign sourced income.

If a tax credit is claimed and the foreign tax is subsequently refunded, the amount of tax credit claimed (and refunded) must be paid to the Inland Revenue within 30 days of the date on which the foreign tax was refunded.

New Zealand has agreements for the avoidance of double taxation concluded with most of New Zealand’s major trading partners.

General tax credits

What are the general tax credits that may be claimed in New Zealand? Please list below.

  • Pay As You Earn (PAYE).
  • Foreign Tax Credit (FTC).
  • Resident Withholding Tax (RWT).
  • Non-resident Withholding Tax (NRWT).
  • Imputation Credits (IC).

Sample tax calculation

This calculation assumes a married taxpayer resident in New Zealand with two children whose three-year assignment begins 1 January 2013 and ends 31 December 2015. The taxpayer’s base salary is USD100,000 and the calculation covers three years.

Calendar 2013



Salary 100,000 100,000 100,000
Bonus 20,000 20,000 20,000
Cost-of-living allowance 10,000 10,000 10,000
Housing allowance 12,000 12,000 12,000
Company car 6,000 6,000 6,000
Moving expense reimbursement 20,000 0 20,000
Home leave 0 5,000 0
Education allowance 3,000 3,000 3,000
Interest income from non-local sources 6,000 6,000 6,000

Exchange rate used for calculation: USD1.00 = NZD1.30.

Other assumptions

  • All earned income is attributable to local sources.
  • Bonuses that arise for each calendar year are earned evenly throughout the year and are paid in January of the following year.
  • Cost of living, housing, and education allowances are paid evenly through the year.
  • Home leave travel is either structured to be non-taxable, or is subject to FBT in the hands of the employer.
  • The company car is used for business and private purposes and originally cost USD50,000.
  • The employee is deemed resident throughout the assignment.
  • Tax treaties and totalization agreements are ignored for the purpose of this calculation.

Calculation of taxable income

Year-ended 31 March 2013




Months in New Zealand during tax year 3 12 12 9
Earned income subject to income tax        
Salary 32,500 130,000 130,000 97,500
Bonus   26,000 26,000 26,000
Cost-of-living allowance 3,250 13,000 13,000 9,750
Housing allowance   15,600 15,600 11,700
Company car        
Moving expense reimbursement        
Home leave        
Education allowance 975 3,900 3,900 2,925
Total earned income 40,625 188,500 188,500 147,875
Other income 1,950 7,800 7,800 5,850
Total income 42,575 196,300 196,300 153,725
Total taxable income 38,675 196,300 196,300 153,725

Calculation of tax liability

Year-ended 31 March 2013




Taxable income as above 38,675 196,300 196,300 153,725
New Zealand tax thereon   64,144 64,144 47,966
Domestic tax rebates (dependent spouse rebate)        
Foreign tax credits        
Total New Zealand tax 5,788 55,699 55,699 41,649


1Certain tax authorities adopt an "economic employer" approach to interpreting Article 15 of the OECD model treaty which deals with the Dependent Services Article. In summary, this means that if an employee is assigned to work for an entity in the host country for a period of less than 183 days in the fiscal year (or, a calendar year of a 12-month period), the employee remains employed by the home country employer but the employee’s salary and costs are recharged to the host entity, then the host country tax authority will treat the host entity as being the "economic employer" and therefore the employer for the purposes of interpreting Article 15. In this case, Article 15 relief would be denied and the employee would be subject to tax in the host country.

2For example, an employee can be physically present in the country for up to 60 days before the tax authorities will apply the ‘economic employer’ approach.

3Sample calculation generated by KPMG, the New Zealand member firm of KPMG International, based on the Income Tax Act 2004.

© 2016 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

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