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Thread: NZ Tax Resident contracting in UK through Ltd co

  1. #1
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    May 2014
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    Default NZ Tax Resident contracting in UK through Ltd co

    Hi - I am an NZ tax resident and just spent 9 months in the UK on a working holiday. The company I contracted to in the UK insisted that I set up my own Ltd company in order to invoice for my services. I am the only shareholder and director. My intention was to access my contract payments by paying myself dividends through my Ltd company. Now I am back in NZ I have talked to someone who says that I will need to pay NZ tax on these dividends - even though I would have already paid UK corporation tax on them, effectively paying tax twice on my UK income. Does anyone know if this is correct. The alternative is to give a directors loan and then forgive it - but this can't now happen in this tax year and means that I would need to pay National Insurance. Has anyone else come across these issues? I am not sure what the best way is to proceed. I already paid for UK tax advice last year but don't think they understood the NZ rules.

  2. #2
    Join Date
    Jul 2006
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    Dairy Flat, Auckland
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    This may help you

    https://www.ird.govt.nz/international/residency/dta/

    You can always check with IRD, I always find them very helpful

  3. #3
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    May 2014
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    New Zealand
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    Thanks, I've been reading the IRD info. Does indicate that I would have to pay tax on my dividends which just seems crazy since I will already have paid tax on my earnings in uk. Does anyone have advice on best way to avoid this?

  4. #4
    Join Date
    Oct 2006
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    Waterloo, Lower Hutt
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    The distinction is that the company paid tax on its earnings and you have received dividends which would be taxable income for you as an individual.
    It could be useful to talk to an accountant with experience in UK/NZ taxation to provide guidance on the best options available for you.

  5. #5
    Join Date
    May 2014
    Location
    New Zealand
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    Yep I get that distinction, but at the heart of it - it is my contractor earnings that effectively will get taxed twice, once through corporation tax in the UK and once through income tax in NZ which is not fair. Is there a legal way to avoid paying tax on my dividends in NZ? If there isn't then my UK company will have to pay my earnings to me as salary or directors loan I guess? Have been to 3 tax accountants now, one in UK and two here - different story from all of them!

  6. #6
    Join Date
    Nov 2012
    Location
    New Zealand
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    34

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    Quote Originally Posted by catherineM View Post
    Hi - I am an NZ tax resident and just spent 9 months in the UK on a working holiday. The company I contracted to in the UK insisted that I set up my own Ltd company in order to invoice for my services. I am the only shareholder and director. My intention was to access my contract payments by paying myself dividends through my Ltd company. Now I am back in NZ I have talked to someone who says that I will need to pay NZ tax on these dividends - even though I would have already paid UK corporation tax on them, effectively paying tax twice on my UK income. Does anyone know if this is correct. The alternative is to give a directors loan and then forgive it - but this can't now happen in this tax year and means that I would need to pay National Insurance. Has anyone else come across these issues? I am not sure what the best way is to proceed. I already paid for UK tax advice last year but don't think they understood the NZ rules.
    There may be ways to mitigate the tax outcome. Some that come to mind include:

    1. Whether the UK company may be NZ tax resident and can still elect to be a Look-Through Company. This would effectively deem both the UK income and UK tax paid to flow through to you. The dividend would then be exempt from tax in NZ.

    2. Whether the personal services attribution rules would apply to deem the company's income to be yours for NZ tax purposes. I would need to check if those rules allow the UK tax paid to also be claimed by you.

    If you would like to use my professional services to try and solve this, send me a private message. I am a CA who specialises in tax and happy to help as best I can.

  7. #7
    Join Date
    May 2014
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    New Zealand
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    Thanks Chris. I will try to message you -it won't let me at the moment as I haven't posted enough grr!

  8. #8
    Join Date
    May 2014
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    New Zealand
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    Chris, are you able to message me?

  9. #9
    Join Date
    Feb 2008
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    You should be able to message him shortly - the system enables PMing automatically, and can take around 20 minutes to 'notice' when someone has clocked up their five posts.

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