Tax obligations for overseas investors
Question from stuart updated on 22nd January 2008:
Our expert responded:
There are quite a few issues here to be considered, and I would suggest that you take some specialist tax advice for your situation. However, I will briefly cover some of the major issues. Firstly, if you were an NZ tax resident between 1994 to 1999, which is when you were renting out your UK property, then you have an obligation to include in your NZ tax return all of your worldwide income, which will include any income earned from renting out your property in the UK. Secondly, if you have claimed any depreciation since 1999, then there will be depreciation recovered on selling the property and income tax payable on this. Thirdly, if the house was originally purchased as your home and not an investment property, so that that was the purpose for why you took out the mortgage, then it is doubtful that any interest expense is tax deductible without a change in ownership for the change of use. And last but not least, as you are now back to being a UK tax resident, you are subject to UK tax law. In NZ we do not have a capital gains tax, so if you sell the property here in NZ, you will not have to pay any capital gains tax in NZ. However, if you as a UK tax resident and are subject to capital gains tax, then you will have to pay tax in the UK on your NZ asset.
Kenina Court is a director of Acorn Solutions Limited, an accounting firm dedicated to working with clients to help them create wealth. She is an avid property investor, entrepreneur and seminar presenter on asset protection and wealth strategies.