Page 1 of 2 12 LastLast
Results 1 to 10 of 15

Thread: Devastating Impact of New Tax Rules for Foreign Investments

  1. #1
    Join Date
    Oct 2007
    Location
    Christchurch
    Posts
    383

    Default Devastating Impact of New Tax Rules for Foreign Investments

    My wife and I recently began considering packing up the (American) family, moving to NZ and living off of our investment income (all investments held in the US). The numbers were looking pretty good until I stumbled across the new tax rules for foreign investments. Unfortunately, it seems that our parade has been rained upon.

    Other than our IRAs, 401ks and 403b plans (more on that later), US income tax has been paid on the bulk of our investments. We are now disheartened to learn that should we immigrate to NZ, we would essentially be required (after the four-year grace period) to pay additional tax on this accumulated wealth. I had figured that with carefully planned realization of capital gains, we could limit our US taxable income to less than half of our spending. With low capital gains tax in the US and no capital gains tax in New Zealand, it seemed that the tax burden would be quite managable. The prospect of paying high tax rates on 5% of our investment portfolio on an annual basis has changed everything. Instead of a tax bill (US and NZ combined) of less than 10% of annual spending, we're now looking at 30% or more, depending on how tax-deferred investments are treated by the NZ IRD. Am I missing something or does this new rule truly blow us out of the water?

    I have scoured the internet and have found no information on how the NZ IRD treats US tax-deferred investments such as IRAs, 401ks, 403b and 529 plans under the new legislation. Does anyone have details?

    Another concern is balancing US and NZ tax. With what are now very different definitions of "income", it seems that this is not so straight forward. The "fair dividend" upon which we would have to pay tax in NZ would not be considered income in the US (other than the part that may be made up of dividend payments). With a large NZ tax bill and a small US tax bill, it seems that it would be in our best interest to try to recognize as much US income as possible (since it would not increase our total tax liability and might save us some money down the road if the rules change again). The idea of trying to claim more income seems strange but the new NZ rules seem to encourage this kind of investment behavior. Any thoughts out there?

    Our investments are currently held jointly between my wife and myself and we file jointly in the US. For NZ tax purposes, can the "fair dividend" associated with our investments be divided between us? (I understand that the concept of "married filing jointly" is foreign to the NZ tax code.)

    Many thanks for your thoughts. I have learned a lot from this board and hope to learn more...
    Last edited by Bozeman; 15th October 2007 at 06:02 PM.

  2. #2
    Join Date
    Nov 2006
    Posts
    312

    Default

    Hi Bozeman, I'm anxiously awaiting someone in the know to reply. If you don't get an appropriate response soon, you may want to try to contact the IRD directly via mail, and request answers via mail.

    FYI, I've spoken on the phone to the IRD a few times, and asked about 401K / IRA treatment. Just in case they hadn't heard about 401k or IRAs, I explained to them that they are a bit like kiwisaver. Their response was usually, "Yes, you could sign up for kiwisaver." I didn't get it in writing, but twice they came to the conclusion that they'd likely honor the US tax deferred/retirement schemes. However, I didn't bring up Roth 401k/IRAs though.

  3. #3
    Join Date
    Oct 2007
    Location
    Christchurch
    Posts
    383

    Default

    Hi Suebeenz, I was also coming to the conclusion that I will need to contact the IRD directly. Before we would consider making the leap to NZ, we would need a pretty definitive answer... Hopefully someone will jump in with some good info.

  4. #4
    Join Date
    May 2006
    Location
    NZ - Hibiscus Coast
    Posts
    635

    Default Welcome !

    Hi Bozeman,

    My apologies, I can't help you with your tax questions, but just wanted to welcome you to the forum and wish you luck with your enquiries. I'm sure many on this forum would also be interested in the outcome, hopefully there's someone on here who can tell you more...

    Cheers,
    Silver

  5. #5
    Join Date
    Nov 2004
    Location
    Wellington, originally USA
    Posts
    915

    Default

    I would suggest that you talk to someone who knows the tax laws in both countries and can look at your investments in particular. Yes, I've read some people's stories on this board of them getting dinged by not having cashed out of all their American investments- but I don't know if that was just stocks, or retirement stuff too.


    http://www.enz.org/forum/showthread.php?t=10832
    http://www.enz.org/forum/showthread.php?t=4719


    Or look at moving to Switzerland, they have an extremely favorable tax structure.
    Last edited by tigerlily; 17th October 2007 at 05:18 PM.

  6. #6
    Join Date
    Oct 2007
    Location
    Christchurch
    Posts
    383

    Default

    Hi Silver, thank you kindly for the warm welcome. I read a lot of posts on the board before posting myself and was pleased to see that the exchanges here are very civil and friendly.

    Hi Tigerlily, I did see those posts but thanks for taking the time to point them out. It is pretty clear that we need some professional advice - added to the "to do" list. I'll talk to the wife and kids about Switzerland as soon as I get home from work...

  7. #7
    Join Date
    Nov 2006
    Posts
    312

    Default

    Quote Originally Posted by Bozeman View Post
    Hi Tigerlily, I did see those posts but thanks for taking the time to point them out. It is pretty clear that we need some professional advice - added to the "to do" list. I'll talk to the wife and kids about Switzerland as soon as I get home from work...
    Where does Top Gear's Jeremy Clarkson live again? I thought he lived in english speaking tax haven ....

    (learning two new languages might be tough ...)

  8. #8
    Join Date
    Dec 2005
    Posts
    506

    Default

    Quote Originally Posted by suebeenz View Post
    Where does Top Gear's Jeremy Clarkson live again? I thought he lived in english speaking tax haven ....

    (learning two new languages might be tough ...)
    Isle of Man,

    hels

  9. #9

    Default

    Regarding 401K and IRA's, this booklet (Overseas Private Pensions) from the IRD should be applicable:
    http://www.ird.govt.nz/resources/fil...0764/ir257.pdf

    -B

  10. #10
    Join Date
    Oct 2007
    Location
    Christchurch
    Posts
    383

    Default

    Quote Originally Posted by phatsharpie View Post
    Regarding 401K and IRA's, this booklet (Overseas Private Pensions) from the IRD should be applicable:
    http://www.ird.govt.nz/resources/fil...0764/ir257.pdf

    -B
    Thanks, B. Now I need to get off my thumb, contact the IRD and ask whether or not IRAs and the like qualify as a "QFPA interest".

Page 1 of 2 12 LastLast

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •