Tax residency and wealth structuring for new New Zealand residents

For a high-net-worth individual contemplating relocation, New Zealand presents a tax framework that is simultaneously generous to newcomers and exacting in its long-term logic. The country does not offer a non-dom or special tax-resident regime akin to the United Kingdom’s remittance basis or Italy’s flat tax; instead, it grants a four-year transitional period during which most foreign-source income remains untaxed, after which the resident is taxed on worldwide income at progressive rates up to 39 percent. Understanding the precise mechanics of the residency test, the source rules, and the absence of a capital gains tax on most assets is essential for any principal or advisor structuring a move before the 2026-27 tax year, when certain temporary provisions are set to expire. ## The statutory residency test and its trigger points New Zealand determines tax residency under section YD 1 of the Income Tax Act 2007 using a two-part test that is binary and fact-driven. An individual becomes a tax resident if they are present in the country for 183 days in any 12-month period, or if they have a “permanent place of abode” in New Zealand, regardless of days spent. The permanent place of abode test is broader than owning a home; the Inland Revenue Department’s interpretation guide (IR292, April 2024) states that it includes any dwelling available for the individual’s use on a continuing basis, whether owned, leased, or provided rent-free by a family trust or employer. A person who spends fewer than 183 days in New Zealand but maintains a house, a car, a club membership, and a bank account can be deemed resident from the day the abode is established. The practical consequence for a wealthy migrant is that the transitional resident rules begin on the date of arrival, not on the date a visa is granted. Immigration New Zealand’s investor visa categories — the Active Investor Plus visa, which requires a minimum investment of NZD 5 million to NZD 15 million depending on the investment type, as detailed in the Immigration Instructions (AIP, effective 1 October 2025) — typically require the applicant to be physically present in New Zealand to activate the visa. Once that landing occurs, the 183-day clock starts, and the permanent place of abode test can be triggered immediately if the individual purchases a home within the first week. ## The transitional resident exemption: scope and limitations New Zealand’s transitional resident exemption, codified in sections HR 8 to HR 11 of the Income Tax Act 2007, provides a four-year window during which most foreign-source income is exempt from New Zealand tax. The exemption applies automatically to any individual who has not been a New Zealand tax resident for any part of the previous ten years; it begins on the day the person becomes resident and ends on the fourth anniversary of that day. During this period, the individual is not taxed on foreign dividends, interest, royalties, rental income, or capital gains derived from assets located outside New Zealand. The exemption does not apply to employment income earned while physically present in New Zealand, regardless of the employer’s location, nor to income from services performed in New Zealand. The critical limitation for high-net-worth individuals concerns controlled foreign companies and foreign investment funds. While the transitional exemption shelters most passive foreign income, it does not override New Zealand’s foreign investment fund (FIF) rules for interests in offshore companies that are not listed on a recognised exchange. The FIF rules, under sections EX 1 to EX 69 of the Act, attribute a deemed rate of return — typically 5 percent of the opening market value — on certain foreign shares held by a resident. For a transitional resident, the FIF rules are suspended for the four-year period, but the suspension ends abruptly on the fourth anniversary. An individual who holds a portfolio of unlisted offshore companies must plan for the FIF attribution that begins in year five, or restructure those holdings before the exemption lapses. ## Source income and the absence of a capital gains tax New Zealand is one of the few developed economies without a comprehensive capital gains tax. The Income Tax Act 2007 taxes gains on the sale of property only if the property was acquired with the intention of resale (the “bright-line” test), or if the sale occurs within a specified holding period for residential land. As of 1 July 2024, the bright-line test for residential land is two years for properties acquired after that date, reduced from five years under the previous government’s policy (Taxation (Annual Rates for 2024-25, Bright-Line Test, and Other Matters) Act 2024). For commercial property, shares, and most other assets, there is no capital gains tax at all, provided the taxpayer is not in the business of trading those assets. This absence creates a structural advantage for the wealthy migrant who intends to realise gains on foreign assets after becoming a New Zealand resident. A transitional resident who sells a foreign business or a portfolio of shares during the four-year window pays no New Zealand tax on the gain, provided the asset was not acquired with the intention of resale in New Zealand. After the transitional period ends, the same gain on a foreign asset would be taxable if the asset is sold while the individual is a full resident, unless the gain is sourced outside New Zealand under the source rules in section YD 4. The source rules treat a gain as New Zealand-sourced if the asset was located in New Zealand at the time of sale, or if the seller was a New Zealand resident when the contract was entered into. A non-resident who sells shares in a foreign company while physically present in New Zealand may still be treated as deriving New Zealand-sourced income if the sale is part of a business carried on in New Zealand. ## Pre-arrival structuring: trusts, entities, and timing The most consequential planning step for a high-net-worth individual moving to New Zealand is the establishment of a foreign trust or the restructuring of existing offshore entities before the residency date. Under New Zealand’s trust tax regime, a foreign trust that has a New Zealand resident trustee is subject to tax on its foreign-source income only if the trustee distributes that income to a New Zealand resident beneficiary. The transitional resident exemption, however, means that a foreign trust with a New Zealand resident trustee can accumulate foreign income tax-free for four years, and then distribute it to the resident after the transitional period ends, provided the distribution is not sourced from New Zealand. The Inland Revenue Department’s interpretation statement IS 24/03 (April 2024) clarifies that a trust is a “foreign trust” for New Zealand purposes if no settlor was a New Zealand resident at the time the trust was settled, and no settlor has been a New Zealand resident at any time during the income year. For a wealthy individual who is not yet a New Zealand resident, settling a trust in a low-tax jurisdiction such as Singapore or the Cook Islands before arrival ensures that the trust remains foreign for the entire duration of the individual’s New Zealand residency, provided no new settlement is made after arrival. The trust can then hold the individual’s foreign assets, receive foreign income, and defer New Zealand tax indefinitely, as long as no distribution is made to the resident. A second structuring option involves the use of a New Zealand limited partnership, governed by the Limited Partnerships Act 2008, which is treated as a transparent entity for tax purposes under sections HR 1 to HR 7 of the Income Tax Act. A non-resident who contributes foreign assets to a New Zealand limited partnership before becoming a resident can ensure that the partnership’s income retains its foreign source character, and that the individual’s share of that income is sheltered by the transitional exemption. The partnership structure also avoids the FIF rules, because the partnership itself is not a foreign investment fund; the individual holds an interest in a New Zealand entity, which is outside the FIF regime. ## The 2026-27 tax year and the expiration of temporary provisions Two temporary tax provisions that affect wealthy migrants are scheduled to expire or change in the 2026-27 tax year. The first is the reduced bright-line test period for residential land, which was set at two years by the Taxation (Annual Rates for 2024-25, Bright-Line Test, and Other Matters) Act 2024. The previous government had extended the bright-line test to ten years in 2021, then to five years in 2023; the current government’s reduction to two years is legislated to remain in effect until 1 July 2026, after which the test will revert to five years unless Parliament extends the two-year period. A wealthy migrant who purchases residential land in New Zealand during the transitional period and sells it within two years will face no tax on the gain; after 1 July 2026, the same sale within five years would be taxable. The second provision concerns the foreign investment fund exemption for transitional residents. The exemption is not time-limited by the statute; it is tied to the four-year transitional period that begins on the residency date. However, the Inland Revenue Department has indicated in its Tax Information Bulletin Vol 36, No 5 (June 2024) that it is reviewing the interaction between the transitional exemption and the FIF rules for residents who hold interests in foreign superannuation schemes. A taxpayer who holds a foreign pension or retirement fund that is classified as a foreign investment fund may be required to attribute FIF income from the first year of residency, regardless of the transitional exemption, if the fund is not a “foreign superannuation scheme” as defined in section EX 31. The department’s review is expected to produce a binding ruling by late 2026, but until then, the safe course is to treat any foreign pension as potentially subject to FIF attribution from day one. ## Structuring for the long term: the permanent resident tax position After the four-year transitional period expires, the individual becomes a full New Zealand tax resident subject to worldwide income taxation at progressive rates. The current personal tax rates, as set by the Taxation (Annual Rates for 2024-25) Act, are 10.5 percent on the first NZD 14,000, 17.5 percent on income up to NZD 48,000, 30 percent on income up to NZD 70,000, 33 percent on income up to NZD 180,000, and 39 percent on income above NZD 180,000. There is no wealth tax, no inheritance tax, and no estate duty; the only ongoing tax on capital is the bright-line test on residential land sales within the applicable holding period. For the high-net-worth individual who intends to remain in New Zealand beyond four years, the optimal long-term structure involves maintaining foreign assets in a foreign trust with no New Zealand resident trustee, and holding New Zealand assets directly or through a New Zealand company. A foreign trust with no New Zealand resident trustee is not subject to New Zealand tax on its foreign-source income, even if the settlor is a New Zealand resident, because the trust is treated as a non-resident entity under section HC 26 of the Act. The settlor can receive distributions from the trust without New Zealand tax, provided the distribution is sourced from the trust’s foreign income and the trust has no New Zealand resident trustee at the time of distribution. A New Zealand company, on the other hand, is taxed at 28 percent on its worldwide income, but can distribute dividends to a resident shareholder who then pays tax at the shareholder’s marginal rate, with imputation credits for the corporate tax already paid. The imputation system, under sections OB 1 to OB 72 of the Act, ensures that income is taxed once at the shareholder’s effective rate, which for a top-bracket individual is 39 percent. A company that holds New Zealand real estate can defer shareholder tax by retaining earnings, as long as the company does not become a “close company” under section YA 1, which would require the shareholder to attribute a portion of the company’s income personally. ## Actionable takeaways for the migrating principal - Establish a foreign trust in a jurisdiction such as Singapore or the Cook Islands before the date of first arrival in New Zealand, with no New Zealand resident trustee, to ensure that foreign assets and income remain outside the New Zealand tax net indefinitely. - Realise any significant capital gains on foreign assets during the four-year transitional resident period, while the gain is exempt from New Zealand tax regardless of the asset’s location. - Review all foreign pension and superannuation interests before arrival to determine whether they fall within the FIF rules; consider transferring the fund to a structure that is not classified as a foreign investment fund under section EX 31. - Purchase residential land in New Zealand before 1 July 2026 to benefit from the two-year bright-line test, and hold the property for at least two years to avoid any tax on sale. - Structure any New Zealand business interests through a New Zealand company rather than a limited partnership if the intention is to reinvest profits rather than distribute them, to take advantage of the 28 percent corporate rate and the imputation credit system. - Engage a New Zealand tax advisor with specific experience in cross-border trust and FIF compliance at least six months before the planned arrival date, because the structuring decisions made before residency are irrevocable under the Income Tax Act 2007. ## Sources - Income Tax Act 2007, sections YD 1, YD 4, HR 8–HR 11, EX 1–EX 69, EX 31, HC 26, OB 1–OB 72, YA 1. Available at https://www.legislation.govt.nz/act/public/2007/0097/latest/whole.html - Inland Revenue Department, “IR292: Tax Residence,” April 2024. Available at https://www.ird.govt.nz/forms-guides/ir292 - Inland Revenue Department, “Interpretation Statement IS 24/03: Foreign Trusts,” April 2024. Available at https://www.taxtechnical.ird.govt.nz/interpretation-statements/is-24-03 - Inland Revenue Department, “Tax Information Bulletin Vol 36, No 5,” June 2024. Available at https://www.taxtechnical.ird.govt.nz/tax-information-bulletins/2024/tib-vol-36-no-5 - Taxation (Annual Rates for 2024-25, Bright-Line Test, and Other Matters) Act 2024. Available at https://www.legislation.govt.nz/act/public/2024/0033/latest/whole.html - Immigration New Zealand, “Active Investor Plus Visa — Immigration Instructions,” effective 1 October 2025. Available at https://www.immigration.govt.nz/opsmanual/