Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Tax credits and other credits - Tax credits for foreign income tax

LJ 1: What this subpart does

You could also call this:

“This part explains how to get tax credits for foreign income tax”

This part of the law explains how you can get a tax credit for foreign income tax you’ve paid. Here’s what you need to know:

When you live in New Zealand and earn money from outside the country, you might have to pay tax on that money in New Zealand. But if you’ve already paid tax on that money in another country, you might be able to get some of that tax back as a credit.

To get this credit, the tax you paid overseas must not be from a country or type of income listed in schedule 27. This schedule shows countries and types of income where New Zealand doesn’t recognise the tax paid.

If a company that doesn’t live in New Zealand pays you a dividend (which is a share of the company’s profits), and that company has paid tax on the dividend in its home country, then that dividend is treated as if it came from that country.

If you’re not sure how much of your income came from outside New Zealand, there’s a rule called Section YD 5 that helps figure this out.

This law helps make sure you’re not taxed twice on the same money - once overseas and once in New Zealand.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1518100.

Topics:
Money and consumer rights > Taxes
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LH 17: Some definitions, or

“Definitions for tax credits removed and no longer apply”

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LJ 2: Tax credits for foreign income tax, or

“How to claim tax credits for overseas income tax paid”

Part L Tax credits and other credits
Tax credits for foreign income tax

LJ 1What this subpart does

  1. This subpart provides the rules for dividing assessable income from foreign-sourced amounts into segments and allows a tax credit for foreign income tax paid in relation to a segment of that income.

  2. The rules in this subpart apply only when—

  3. a person resident in New Zealand derives assessable income that is sourced from outside New Zealand; and
    1. foreign income tax is not paid in a country or territory listed in schedule 27 (Countries and types of income with unrecognised tax) to the extent to which the foreign income tax is paid on the types of income listed in the schedule.

      1. Repealed

      2. If a company is not resident in New Zealand, and is resident in another territory or is resident in another territory for the purposes of a double tax agreement between New Zealand and the territory, and foreign income tax is imposed by the territory on a dividend paid by the company, a dividend paid by the company has a source in the territory.

      3. Repealed

      4. Section YD 5 (Apportionment of income derived partly in New Zealand) applies to determine how an amount is apportioned to sources outside New Zealand.

      Compare
      Notes
      • Section LJ 1(2)(a): amended (with effect on 1 April 2008), on (applying for the 2008–09 and later income years), by section 100 of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
      • Section LJ 1(2)(a): amended, on , by section 109(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
      • Section LJ 1(3) heading: repealed (with effect on 1 April 2008), on , pursuant to section 335(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
      • Section LJ 1(3): repealed (with effect on 1 April 2008), on , by section 335(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
      • Section LJ 1(4): replaced, on , by section 159(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
      • Section LJ 1(5) heading: repealed, on , pursuant to section 159(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
      • Section LJ 1(5): repealed, on , by section 159(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
      • Section LJ 1(6) heading: added (with effect on 1 April 2008), on , by section 335(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
      • Section LJ 1(6): added (with effect on 1 April 2008), on , by section 335(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
      • Section LJ 1 list of defined terms derived from New Zealand: repealed, on , by section 109(2)(a) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
      • Section LJ 1 list of defined terms foreign tax: repealed, on , by section 159(3) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
      • Section LJ 1 list of defined terms source in New Zealand: inserted, on , by section 109(2)(b) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).