Tax residency: The invisible trap
New Zealand Super portability and health insurance is mind-boggling, but wait until you start thinking about tax. A handful of countries, such as Malaysia, have tax-free retirement visas. But in most cases, you need to walk the tightrope between not just one complex tax system, but two.
I asked Terry Baucher of Baucher Consulting to explain. Anyone retiring overseas should take tax advice. But in general, you need to know if you’re still resident in New Zealand for tax purposes and whether you’ll be paying tax here, there, or in both countries.
In terms of residency, the overriding principle for New Zealand tax is you’re a resident if you have a permanent place of abode here that you can stop off the plane and return to. So not a property that is rented out, Baucher said. A secondary test is if you’re here for 183 days in the year, you’re most likely a resident.
The next question is where you pay tax, Baucher said. It’s not unusual for both countries to claim you’re a tax resident. If it’s one of the 40 countries that New Zealand has a double tax agreement with, then that comes into play and you’ll usually not pay tax on your income. Your NZ Super is tax-free overseas if you qualify for portability.
If you’re resident in another country, but keep investments here, will you pay capital gains tax (CGT) there? Might you be charged CGT on your KiwiSaver growth or withdrawals? Although NZ Super and KiwiSaver withdrawals are tax-free here, they’re often taxable in foreign countries.
Likewise, even if you’re in a low-tax or tax-free country, the laws can change at any time. That happened in Portugal in 2024, where a 10% flat tax is being phased out. Not great if you did your numbers on that. It can happen anywhere – and it’s tough luck.
Baucher said he clears up an inordinate number of cross-border tax messes for clients who haven’t done their homework. “Cross-border tax issues are highly complex, whether you’re going across with, say, $100,000 or $10 million. It’s well worth just asking for advice before you make a move.”
Elder care, death, wills and powers of attorney
Chances are that if you’re moving overseas to retire, you’ll die overseas. That might be sudden. What if you can’t look after yourself? Will someone scoop you up?
Virtually all countries have the equivalent of rest home and dementia care. But can you access it and afford it? Thailand being my test case, I checked and dementia care costs around $6700 a month, which is cheaper than here. I’ve heard the care is better.
Wills and related issues
It’s complex. Take advice from lawyers or trustee companies in New Zealand before you leave, and a lawyer in the country you retire to. Do you need a local will? Is there an inheritance tax in that country?
Glenys Talivai, the chief executive of Public Trust, cites the example of one Kiwi who left a complex mess when he died in Thailand. “He passed away unexpectedly, leaving his estate to his children. Most of his assets were in New Zealand, but he also had vehicles and bank accounts in Thailand, and no separate will for those Thai assets.
“In Thailand, banks require formal court authority to release any asset information, so we had to appoint a local agent, adding time and expense,” Talivai said. The court process alone was expected to take 5–6 months.
If your will is here, your beneficiaries will need to get probate here, then have that resealed in the country where you lived.
Talivai said if you’re living overseas, it’s a good idea to have a will in that country to deal with assets held there. She also recommended setting up a power of attorney and guardianship for both property and personal care.
Final note
Whatever you do, read, join forums of retirees in the country you want to go to, and take your time planning. Happy retirement.
Email Diana Clement at diana.clement@nzme.co.nz.
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