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LJ 2: Tax credits for foreign income tax
or “How to claim tax credits for overseas income tax paid”
You could also call this:

“What counts as tax paid in another country”

Foreign income tax means a tax from another country that meets certain requirements. It can be a tax that a double tax agreement applies to, which helps prevent you from being taxed twice on the same income.

It also includes something called a “qualified domestic minimum top-up tax” from another country. This is defined in special rules about global taxes.

Foreign income tax can also be a tax from another country that is very similar to the tax that will be applied in New Zealand after some new tax laws come into effect. These new laws are part of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024.

However, foreign income tax does not include certain types of taxes from other countries that are based on specific parts of the global anti-base erosion model rules. These are special international tax rules.

Remember, these definitions are important for understanding how New Zealand deals with taxes from other countries in relation to your income.

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Next up: LJ 4: Meaning of segment of foreign-sourced income

or “What counts as income from overseas for tax purposes”
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Part L Tax credits and other credits
Tax credits for foreign income tax

LJ 3Meaning of foreign income tax

  1. For the purposes of this Part, foreign income tax—

  2. means—
    1. an amount of a tax of another country meeting the requirements of section YA 2(5) (Meaning of income tax varied):
      1. in relation to a double tax agreement providing relief from tax or double taxation, an amount of tax to which the double tax agreement applies; and
      2. includes an amount of a tax of another country that is a qualified domestic minimum top-up tax, as defined in Article 10.1.1 of the global anti-base erosion model rules; and
        1. includes an amount of a tax of another country that is of substantially the same nature as the tax that will be imposed by this Act—
          1. when all the provisions of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (the amendment Act) listed in section 2(31) and (33) of the amendment Act have come into force; and
            1. because of the application of the modifications to Article 2.1 of the global anti-base erosion model rules made by section 123(3) of the amendment Act; and
            2. does not include an amount of a tax of another country that is based on—
              1. Articles 2.1 to 2.3 of the global anti-base erosion model rules; or
                1. Articles 2.4 to 2.6 of those model rules.

                Notes
                • Section LJ 3: replaced (with effect on 1 January 2024), on , by section 105(1) of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).