Korean Job Discussion Forums

[kiwiduncan]

Could the kiwis who are working in Korea with rental properties back in New Zealand please tell me about the taxes and other charges they face if earning money overseas. From my understanding if I were to rent out a house while living in Korea I would end up with the New Zealand governement charging me taxes on my Korean earnings. Is this true, or do they just tax my kiwi rental property income?

Cheers,

Duncan

p.s., Nelson is fantastic, Blenheim is a redneck shithole.

[kiwiduncan]

Go on Cheonmunka, spill the beans.

[kiwiliz]

I think this depends on your situation.
I have a house in NZ but have been out of the country for several years. I only pay tax on the money earned in NZ and not what is earned here.

But there is a grey area so my advice is to check it out with a tax accountant in NZ.

[kiwiduncan]

Thanks Kiwiliz. If you don't mind me asking, are you renting out the property?

[Katchafire]

Duncan, I found this link that might be of some help.
http://www.ird.govt.nz/technical-tax/questions/questions-determination-residence/qwba-person-working-overseas.html

In particular is this mention:

"The person is not present in New Zealand for more than 183 days in 12 months, so he will not be resident under section OE 1(2) during his time overseas. Notwithstanding this, he will be resident if he has a permanent place of abode in New Zealand under section OE 1(1), because the permanent place of abode test applies regardless of anything else in section OE. For the same reason, a person will not be non-resident under section OE 1(3) if he or she has a permanent place of abode in New Zealand

The permanent place of abode test is a broad one. A person can have a permanent place of abode in New Zealand even though he or she might have a permanent place of abode in another country.

The test of whether someone has a permanent place of abode is a matter of weighing all the facts of a person's circumstances. The nature and quality of the person's connection with New Zealand is important. Cases that have discussed the permanent place of abode test are: FC of T v Applegate 79 ATC 4,307, Case Q55 (1993) 15 NZTC 5,313, and Case H97 (1986) 8 NZTC 664.

In the current situation, counting against a finding of a permanent place of abode are the circumstances of the person's absence; the period of his absence being of significant length, the fact that his family goes with him, and that they take most of their personal property.

On the other hand, the person has some strong associations with New Zealand throughout his absence. Most importantly, he has a job here ready for him to return to, and a house available for him and his family to live in. His intention is that he may come back to New Zealand at the end of his two-year contract. Some property is kept here.

Although the family's house is tenanted in their absence, it can still be seen as being available to family members to live in. In Case Q55, the Taxation Review Authority commented:

a "permanent place of abode" does not require that a dwelling be always vacant and available for the person to live in; but that there is a dwelling in New Zealand which will be available to the taxpayer as a home when, and if, that taxpayer needs it, and that the taxpayer intends to retain that connection on a durable basis, with that locality."

From what I understand that to mean is, you are responsible for taxes because the property you have back home, being rented out or not, is available to you should you or family need it.

Hopes this was helpful.

G

[Sleepy in Seoul]

For about 4 years until the end of last year I had 2 rental properties in Chch. I had bought them as rentals, never lived there and made clear that I never intended to, so that might be a little different. I was declared non-resident by my accountant for the time I lived in Korea (3.5 years) and paid no NZ tax on my Korean income.

OP, do you have a good accountant in NZ?

[Sleepy in Seoul]

For about 4 years until the end of last year I had 2 rental properties in Chch. I had bought them as rentals, never lived there and made clear that I never intended to, so that might be a little different. I was declared non-resident by my accountant for the time I lived in Korea (3.5 years) and paid no NZ tax on my Korean income.

OP, do you have a good accountant in NZ?

[Joe Bradley]

Hi KiwiDuncan: I don't think you have anything to worry about. New Zealand (like many countries) has a double tax agreement with Korea, and, as I understand it, this arrangement means in your case that since you're based in Korea, you're only obliged to pay Korean income tax on your earnings there. There's no way you should have to be taxed twice on your Korean earnings.

As for any rental income you receive back in NZ, well, yes, you would have to pay tax on it (if you declared it), but you can offset that with sundry expenses (mortgage interest, rates, insurance, etc).

But aside from all of the above, I can't see how the NZ IRD would even know what you were earning in Korea -- or, for that matter, that you were even in Korea!

[kiwiduncan]

Hi Gordana, Sleepy in Seoul and Joe Bradley.

Thanks for the responses and extra information. Property prices are predicted to keep on dropping in 2009 so I'm thinking of hanging around here for a while, having a go at buying something later in the year then possibly going back to Korea to pay it off faster.

Unfortunately while urban properties are losing value rural properties are still holding their value. I wonder if declining milk solids payouts will have a knock on effect there.

[blackjack]

One market which is majorly undervalued at the moment is holiday homes. You won't get much rent but you would be looking at major capital gains when the economy picks up