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LJ 5: Calculation of New Zealand tax
or “How to work out New Zealand tax on overseas income”
You could also call this:

“Tax credits for money from trusts and foreign tax payments”

If you live in New Zealand and get money from a trust, this law is about how you can get a tax credit for that money. You can only get a tax credit if the foreign tax paid on the money is very similar to something called non-resident withholding tax.

The amount of tax credit you can get is worked out using a special calculation. This calculation takes into account how much of the total money from the trust you received, and how much foreign tax was paid.

To figure out your tax credit, you need to know three things:

  1. How much of the money you got is taxable
  2. The total amount of money given out by the trust
  3. How much foreign tax was paid

The law explains that the amount of foreign tax that counts for this calculation must be the same kind as mentioned earlier - similar to non-resident withholding tax.

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Next up: LJ 7: Repaid foreign tax: effect on income tax liability

or “How refunds of foreign tax affect your New Zealand tax”
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Part L Tax credits and other credits
Tax credits for foreign income tax

LJ 6Taxable distributions and NRWT rules

  1. This section applies when a person who is a beneficiary of a trust and resident in New Zealand derives a taxable distribution in their capacity as beneficiary of the trust.

  2. The person is not allowed a tax credit in relation to any foreign income tax paid on the taxable distribution unless the tax has substantially the same nature as non-resident withholding tax (NRWT).

  3. The person’s tax credit is equal to an amount calculated using the formula—

    (person's taxable distribution ÷ total distribution) × foreign tax paid.

    Where:

    • In the formula,—

    • person’s taxable distribution is the amount of the taxable distribution derived by the person in their capacity as beneficiary of the trust, including a payment of tax that meets the requirements of subsection (2):
      1. total distribution is the total amount of the distribution derived by the person in their capacity as beneficiary of the trust, including a payment of tax that meets the requirements of subsection (2):
        1. foreign tax paid is the payment of tax that meets the requirements of subsection (2).

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          Notes
          • Section LJ 6 list of defined terms non-resident withholding tax: repealed, on , by section 243 of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).