Travelling Overseas with NZ IP's

[Carpet]

Hi,

I have searched through all the forums looking for other with what I thought would be a common issue but with no success.

I am about to purchase my first IP. In 2 months time I will be heading overseas for work for about 2 years.

I understand an LAQC would be no good as I will have no NZ taxable income to offset against LAQC losses in the year they are earned. And given you can't carry forward LAQC losses I can't utilise them on my return once I get NZ taxable income!

Are there any obvious structures I'm missing here that will allow me to utilise the losses in the IP for the first few years??

Could I perhaps change ownership of the LAQC to a family member with taxable NZ income and have the ownership changed back on my return?

Any help would be great!

[pl]

Perhaps someone else can clarify, but can't you just carry forward the losses into future years? ie for you to use when you get back?

I had a property when i was overseas, but it was under my name, rather than a LAQC. All i did was to carry forward the losses until I got back.

[CJ]

The losses will get transfered to you personally (as always with an LAQC).

They will be carried forward in your own name, not that of the company.

[spaceman]

Hi

I bought my first IP in August 2000 then promptly left the country and have yet to return.

One thing you need to watch is your Tax Residence status.

You can be overseas and earning income that the NZ taxman still wants a slice of. The rules that applies waffles something about an "enduring" relationship with NZ.
This can include things like: Owning property, operating a NZ bank account, having family in NZ, intention to return to NZ .... the list is quite comprehensive and would appear that it could apply to just about everybody unless they sever all ties to NZ.

So if you are unable to become a Non-Resident for tax purposes then as far as the NZ tax man is concerned it's like you never left, and he will want a slice of your pie. Both income earned in NZ (from IP) and overseas. There are some countries that the IRD have a DTA (double tax agreement) with, which can help stop you having to pay tax twice on the same earned income (ie: both overseas and in NZ).
So if you're unable to become a Non-Resident then your LAQC should still be a good idea, assuming it was a good idea to start with.

Becoming a Non-resident changes the picture. The IRD is now longer interested in your overseas income, therefore you have no income that your tax-losses can be applied to. This appears to me to cancel the major benefit of the LAQC. However you say you are planning to return after two years, so even if you become Non-resident it may be worthwile to set up an LAQC with the intention of not using the tax-losses for the first two years and then applying them to your NZ income when you return.

I'm not sure if you can "store up" the tax-losses while you are away with an LAQC. I know that for a "normal" company the losses are perpetual and can be "stored-up" year after year until the company bcomes profitable.

I currently am a Non-Resident for tax purposes, I qualify because of who I work for, even though I should still be a Resident under the rules. My accountant advised me that I was still a Resident, and so did the IRD. I wouldn't take no for an answer and persisted until I got hold of the person in the IRD who deals with people like me. I then got a letter from the IRD saying I was a Non-Resident, which I gave to my accountant.

Because I'm Non-Resident I can't see any benefit for me to a LAQC. I currently own 3 IP's under my own name, and 2 more in 2 separate "regular" companies (with difterent partners in the 2 companies).

This set-up is working nicely for me, though you might well have reasons for taking a different tack.

Good Luck

Cheers
Spaceman

[duvetray]

good words spaceman

I am also Non Resident for tax purposes and have also organised the other advantage of being non domicilied in the UK so that all my ofshore income cannot be taxed by the UK Inland rev. it helped to get this by having a property in my own name in NZ, as u can claim u a re going to retire there and be away from NZ for an undeterminnable time

[Robot]

Spaceman/duvetray, quick question: How did you prove to the IRD that you were a non resident with no ties to N.Z even though you owned property? Also does anyone know if you can carry forward tax loses indefinitely with LAQC's?

[spaceman]

I work for UN-DPKO, doing my bit to make the world a better place.

Because of the different treatment of staff members around the world by their home governments. The UN gives a nett wage (after tax) to its staff
Most govt's play the game by not taxing UN staff members. However some insist that you must pay ... then you claim back from the UN .. then the UN charges an extra amount for that nations UN dues.
Countries that don't bother to pay their UN dues come out ahead if they insist on taxing UN staff members.

So my situation is a little different to most. Initially my accountant and the IRD said I would need to pay tax ..... but I persisted and got my get out of jail free card (letter from IRD)


Not sure about the carrying forward of the tax-losses with an LAQC .... it sounds reasonable to me as you can with a "regular" company

Cheers
Spaceman

[CJ]

Also does anyone know if you can carry forward tax loses indefinitely with LAQC's?

The losses will get transfered to you personally (as always with an LAQC).

They will be carried forward in your own name, not that of the company.

Here is a form re Residence by the IRD:

http://www.ird.govt.nz/forms-guides/number/forms-800-899/ir886-form-nz-tax-res.html

Note: YOU DO NOT HAVE TO FILL THIS IN.

This is a fact finding sheet from teh revenue. It is not compulsory but means they will give you that golden letter. The form lists the factors they will consider.

Just because you have a house in NZ doesn't mean you are a NZ residence. If it is avalaible for your return it is a facgtor suggusting you are. But remember, it is not avalaible as you are renting it out.

Take your family with your. If you leave your wife/Husband and depenant kids, it is a factor you are a NZ resident.

If you intend to be away for less than 2 years, suggests you are a resident, more than 3 years away, suggests that you are not. Between 2-3 years ???

Are you still a member of clubs in NZ? Do you still use your NZ bank account. Who is your employer (NZ or foreign). How pays your wages.

[LotB]

I currently live in America and am in the process of purchasing my first IP in NZ.
I am buying the IP through my LAQC and have been told by an accountant that I can carry the losses forward (I will be returning to NZ in one year).

[tjthorne]

Just another point to note. Any NZ resident company (a company incorporated in NZ) that is owned 25% or more by a non resident shareholder is required to have an audit done under the companies act. This is definitely something to consider.

[CJ]

Just another point to note. Any NZ resident company (a company incorporated in NZ) that is owned 25% or more by a non resident shareholder is required to have an audit done under the companies act. This is definitely something to consider.

The test is more one of Domicile rather than residence. It is possible to loss your residence and retain your domicile. That is my reading of the legislation. Though is definately worth considering as it if an audit is required, it will cost you to get it done.

[lissie]

The losses will get transfered to you personally (as always with an LAQC).

They will be carried forward in your own name, not that of the company.

this is the advice I've had too. I have a LAQC with my brother who is non-resident- he will have a tax return filed as a non-resident and the tax losses will accumulate until/if he returns to NZ and starts earning income. I dont think there is any time limit on this. The tax loss accumulates in HIS name though not with the LAQC.

[CJ]

Ihave a LAQC with my brother who is non-resident- he will have a tax return filed as a non-resident and the tax losses will accumulate until/if he returns to NZ and starts earning income. I dont think there is any time limit on this. The tax loss accumulates in HIS name though not with the LAQC.

There is a time limit. They die with the holder. I assume they can be used in your personal returns after death (I am pretty sure your estate still has to file one) but once they is all sorted they disappear. they can not be gifted or transfered etc.

I guess by this stage you dont really care though.