Duel country tax obligations

Question from frank updated on 6th November 2019:

I am a New Zealand citizen (with a NZ tax code) and live in England. I moved here in the mid 80s and have been paying tax in the UK only since this time. I have just finished building a house in Tauranga and will be renting it out in the medium term and will live in the UK. But I wanted to find out where I should (or where I have to) pay tax before I engage with either tax department? Would it be it New Zealand or the UK?


Our expert Matthew Gilligan responded:

Cutting to the chase, you will have tax obligations in both countries. The fact that the property is situated in New Zealand means that the rental income is deemed to be sourced in New Zealand and despite the fact that you are not tax resident here, you are obliged to account to the New Zealand IRD for all New Zealand sourced income. This means that you will need to employ a New Zealand accountant to calculate the rental profit or loss on the property based on New Zealand tax rules.

Although I do not profess to be an expert in UK tax law, on the presumption that you are tax resident there, I suspect that you will also have an obligation to return the rental profit or loss in the UK as well – calculated according to their rules. Note that you should confirm this with a UK adviser as many countries do offer exemptions for migrants, although you may not qualify for any such exemption given the long period of time that you have lived there. If you do have to account for the New Zealand rental profit or loss in tax returns in the UK, then you will get a credit for tax paid in New Zealand to reduce any UK tax payable.

Matthew heads GRA's specialist property and asset planning division. He helps clients create optimal tax structures and build wealth through property. He has an extensive buy-to-hold property portfolio, is currently involved in over a dozen developments, and is author of two books - Property 101 and Tax Structures 101.

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