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Thread: Taxes if working for non-NZ company?

  1. #1
    trimprover is offline Member
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    Default Taxes if working for non-NZ company?

    I'm trying to get a ballpark estimate of taxes for someone living in NZ but working (telecommuting) for a company which is outside of NZ (in the US). I'm basing my calculations on this page: Move To New Zealand - Understanding New Zealand Tax

    For simplicity, let's say I'm the one doing this, and that my gross income is exactly $100,000 (NZD) per year.

    Question 1: Will the US tax me, even if I am not living in the US?

    Let's be optimistic and assume that the US does NOT tax me, and that only NZ gets to tax my income. So NZ sees my gross as being the full $100,000.

    Question 2: Will my net income be calculated this:

    - Personal Income Tax = $28,810
    - ACC Levy = $1,400
    - NET INCOME = ($100,000 - $28,810 - $1,400) = $69,790

    Question 3: How do "council rates" fit into this equation? What do those rates tend to be (per month)?

    Question 4: Are there any other taxes (besides sales tax) that I need to consider?

    Thanks!
    Last edited by trimprover; 16-04-2009 at 01:30 AM.
    US citizen applying for Permanent Residence via Skilled Migrant Category

    2008-12-16 Submitted EOI
    2009-01-17 EOI successful
    2009-02-03 Received ITA
    2009-04-07 Mailed application

  2. #2
    kokopeli is offline God like figure
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    Hi,

    You should try sending a PM to KiwiHopeful. He and his wife are from the US and spent a year in NZ before returning to the US about this time last year. Mrs KH continued working for her US company while they were here, so they would be able to give you the exact details you need. I'm sure he still pops in every now and then....

    In the meantime, I'm not a tax expert, but it's pretty safe to assume that you will have to pay US tax at source on your US income.

    If you come to NZ with PR you will be able to claim an exemption on paying NZ tax on income earned overseas for four years after your date of arrival. The downside is that (technically) you won't be eligible for Kiwi tax credits such as Working Families if you claim the exemption.

    If you don't claim the exemption (or you have been here for more than four years), you will pay NZ tax on your US income. The NZ IRD will take the amount of US tax that you have paid into account when calculating your NZ tax bill.

    Your NZ tax bill on NZ$100,000 will be something like this:

    $0 - $38,000 at 19.5% = $7220 tax leaving $30,780 net pay
    $38,001 - $60,000 at 33% = $7259 tax leaving $14,470 net pay
    $60,000 - $100,000 at 39% = $15,600 tax leaving $24,400 net pay.

    Total income tax = $30,079.

    You'll also have to pay the full ACC levy of $1,256 on $96,619 of your pre-tax earnings.

    Total tax bill = $31,335.

    That will leave you with leaves take home pay of $68,665.

    Household rates depend on the valuation of your home. Expect about $1,500 - $1,750 per year (payable in four instalments) on an average 4 bedroom home. You only pay these if you are the owner - the landlord pays if you rent.

    Other taxes? The main ones I pay seem to be vehicle registration (about $360 a year, but likely to rise) and Road User Charges (but only if you drive a diesel engine - works out just under $40 per 1,000km for a normal car).

    Hope that helps

    :)

  3. #3
    trimprover is offline Member
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    Thanks! I have a few questions:

    1) Your calculations, and this page use the following formula:
    * 19.5% for income up to $38,000 per annum
    * 33% is taxed on income between $38,001 - $60,000 per annum
    * 39% is taxed on all income above $60,000
    ...but the pay calculator and this other site use:
    Tax Rate Taxable Income Tax Element Remaining
    Bottom (12.5%) $14000.00 $1750.00 $12250.00
    Low (21%) $26000.00 $5460.00 $20540.00
    Mid (33%) $30000.00 $9900.00 $20100.00
    High (39%) $30000.00 $11700.00 $18300.00
    Totals: $100000.00 $28810.00 $71190.00
    The book I'm reading ("Living Abroad in New Zealand", published in 2008) also uses the second formula:
    Your first $14,000 of income is taxed at 12.5 percent, the amount between $14,001 and $40,000 at 21 percent, the amount between $40,001 and $70,000 at 33 percent, and everything over $70,000 at 39 percent.
    Which formula is correct, and why is the other one listed? Is it obsolete?

    2) Do the NZ taxes apply first, followed by the US taxes (with a tax credit), or vice-versa?

    3) Are the Working Family and other tax credits significant enough to not claim an exemption? Currently, we have 2 adults, 1 baby.

    4) The US/NZ Tax Treaty described in this document talks about NZ residents receiving exemptions from US taxes when working "in the United States", which would not apply to me, since I would be a NZ resident still physically in NZ (and working remotely for a US company). That document also says that exemptions require that the US company not be a resident of the US, which is weird; how can a US company not reside in the US?

    This stuff gets confusing! I'd call the IRS and ask them to clarify it for me, but today of all days is the worst time to be calling them with complex questions.
    Last edited by trimprover; 16-04-2009 at 01:29 AM.
    US citizen applying for Permanent Residence via Skilled Migrant Category

    2008-12-16 Submitted EOI
    2009-01-17 EOI successful
    2009-02-03 Received ITA
    2009-04-07 Mailed application

  4. #4
    trimprover is offline Member
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    I went ahead and called the IRS (1-800-829-1040 1 5). They explained that:

    1) "all US citizens are responsible for reporting worldwide income"
    -- so, as long as I am a US citizen, I'll need to file yearly tax forms

    2) US foreign income exclusion needs you to be there 12 months straight, so first year can't get it

    3) i might be able to get a partial year exclusion

    4) i should read the following publications:

    Publication 54 - Tax Guide for US Citizens and Resident Aliens Abroad
    Publication 514 - Foreign Tax Credit for Individuals
    Publication 901 - US Tax Treaties
    Publication 4655 - Tax Worksheet
    Publication 4732 - Federal Tax Information for U.S. Taxpayers Living Abroad (pdf)
    Publication 553 - Tax Changes
    International Taxpayer
    Last edited by trimprover; 16-04-2009 at 02:39 AM.
    US citizen applying for Permanent Residence via Skilled Migrant Category

    2008-12-16 Submitted EOI
    2009-01-17 EOI successful
    2009-02-03 Received ITA
    2009-04-07 Mailed application

  5. #5
    kokopeli is offline God like figure
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    There have been a few changes in NZ tax in the past year - both pre and post election. The 12.5% rule is the right one to use. Check it out here:

    Income tax rates for individuals (Find out about)

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