There are a growing number New Zealand tax residents who hold foreign bank accounts. This is due not just to the growing number of migrants but also New Zealanders returning home from a period working abroad.
In some cases offshore income is being deposited into these accounts and that income is being concealed in some cases. The money is usually accessed from New Zealand using credit or debit cards issued by the foreign bank.
New Zealand law requires that all New Zealand tax residents are taxed on their worldwide income. If foreign income is not declared, tax paid will be lower along with the potential to overstate Working for Families tax credits. In addition, people who conceal income offshore will also pay less child support and decrease their student loan repayment obligations.
The types of funds that are deposited into these bank accounts vary. They include income paid by a non-resident employer, overseas life insurance policies, superannuation schemes, or equity investments held in portfolio accounts.
The IRD are concerned that this foreign income is not “returned’ (or declared). Additionally some people are structuring their affairs by using offshore trusts and companies to make the income appear to be outside the New Zealand tax system. This is further complicated by the fact that someone may still be a New Zealand tax resident even if they are living outside the country.
The IRD has signed Tax Information Exchange Agreements (“TIEA’s”) with a number of jurisdictions, including tax havens. These TIEAs will enable Inland Revenue to obtain more information about international transactions and to identify the existence of any offshore bank accounts held by a New Zealand tax resident.
If you are concerned that you may have overlooked any foreign income, please contact us. We may advise you make a voluntary disclosure in order to straighten out your tax affairs.