We recently received a letter from the IRD in New Zealand in respect of a non-resident client whom only two days later received the same letter to their New Zealand address.
The letter opened with:
“As part of our Compliance Focus Plan, Inland Revenue completes a range of work to ensure New Zealand tax residents return the correct amount of income, including overseas income.
New Zealand tax residents are required to return their income from world-wide sources even if it is not remitted to New Zealand and, in most instances, even if it is being returned in a foreign jurisdiction and tax paid on it there.
Information is received by Inland Revenue from a number of sources and the purpose of this letter is to make initial enquiries regarding information we have received and to verify the overseas income your client has returned.
The information received shows that a credit card, issued by a foreign bank, was used by your client in New Zealand.”
The letter went on to ask for additional information and request bank statements, in this case covering the past 6 years, and providing an “Attachment A” (a completed Overseas Income Questionnaire).
The Next Steps
The client in question had already started gathering the information, when we called a halt and wrote back to the IRD to advise the client in question was non-resident for tax purposes, had filed tax returns here only in respect of NZ sourced income, and therefore the letter could not apply to him.
We are expecting IRD will respond asking us to justify that he is in fact non-resident, and we will deal with that if and when that arrives.
The Inland Revenue Department (IRD) in New Zealand has no right to ask a non-resident for such information in respect of overseas earnings.
Knowing Your Rights
The important learning from this experience is that if you are non-resident, the IRD here has limited ability to ask for information, and you should not respond to any correspondence from them without checking with us first.
If you are unsure of your residency status, we would advise that you seek professional advice first.
Our online residency test is an extremely useful resource and will help you to determine your precise residency status.
If you are in any doubt, we recommend you take the test to see the outcome or speak to us for advice.
Speak to Us or Comment!
If you have concerns about your New Zealand residency status or perhaps you have received a letter like the one shown above, then we can help review your situation and offer advice. Alternatively, let us know what you think in the comments section below, or get in touch with us.
Please feel free to email us directly using the link below:
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Any advice in this publication is not intended or written by Marine Accounts to be used by a client or entity for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing or recommending to another party matters herein.