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Digital Nomad from NZ

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  1. #1

    Join Date
    Sep 2018
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    4

    Digital Nomad from NZ

    Hi there,
    I am an NZ citizen looking at options around setting up a HK company for taxation purposes. I know that NZ and HK have a DTA and so I will not be double taxed on my HK company. I also understand that I only pay tax on income generated in HK. So let's say that I make all my income outside of HK, my tax to pay will essentially be 0. So do I have to declare any earnings to NZ - as they have been taxed in HK essentially.. albeit at 0
    Thanks
    Adam


  2. #2

    Join Date
    May 2015
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    Why set up a HK company? Just get the NZ entity (s) to wire the money directly to your personal account in HK. Should be no need to declare anything in NZ if you're not a tax resident there. FWIW I've been getting paid this way from overseas employers (not NZ) for years and paid no tax in HK or the source countries, and it's legal.


  3. #3

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    Quote Originally Posted by monomono:
    Why set up a HK company? Just get the NZ entity (s) to wire the money directly to your personal account in HK. Should be no need to declare anything in NZ if you're not a tax resident there. FWIW I've been getting paid this way from overseas employers (not NZ) for years and paid no tax in HK or the source countries, and it's legal.
    Opening a non-resident account might be problematic?

    On the other hand, opening a company account without a local presence / resident director might also be non-trivial?

  4. #4

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    Sep 2018
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    I could open a NZ company sure.. but there are big advantages to a HK company. 16% company tax vs. 28% in NZ. HK only taxes income made in HK as well.
    It is easy enough to set up a HK company using various HK businesses to do so.
    As a NZ citizen, no matter where you are in the world you are a nz resident for the purpose of tax. But NZ and HK have a double tax treaty. So, if I pay tax in HK I do not need to pay in NZ.


  5. #5

    Join Date
    May 2015
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    Quote Originally Posted by ajazza:
    As a NZ citizen, no matter where you are in the world you are a nz resident for the purpose of tax.
    Are you sure about that? Most countries (except the US) tax you on the basis of residency, not citizenship.

    https://www.ird.govt.nz/international/residency/about/

  6. #6

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    I dont get it and perhaps I've not read this correctly.

    NZ will not tax you for income found taxable in HK.

    If your income is not taxable in HK, that does not mean its tax free in NZ, it is still world wide income that NZ can tax, depending on where you did the work / earnt that income?


  7. #7

    Join Date
    Sep 2018
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    Except NZ and HK have a double taxation agreement. But that is also the basis of my question.. let me try with an example...

    I set up a HK company... all my sales and income are put through that company. I report my earnings etc that I need to for HK.. I am taxed by HK on the income derived within HK. The other income is 0 rated in HK eyes.. But as this income has been reported and taxed (even at 0%) then with the double taxation agreement then as far as NZ is concerned I have paid tax on that income.

    Tax treaties


  8. #8

    Join Date
    Sep 2018
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    from: The role of double tax agreements | Tax Policy, Inland Revenue

    "Income derived across an international border can potentially be subject to double taxation as a result of two countries taxing the same income. New Zealand relieves double taxation by unilaterally granting its residents credits for foreign tax paid on income that is also subject to New Zealand tax up to the amount of New Zealand tax liability on that income."

    So you are still taxed for the same income in NZ. You just get credit for the tax you paid in HK (0 HKD) to offset the tax you would pay in NZ. It seems like there is no benefit at all.

    ex: your NZ tax is 5k. the tax you paid in HK is 0. You still owe 5k.
    ex 2: your NZ tax is 5k. the tax you paid in HK is equivalent to 3k in credit. Then you still have to pay the remaining 2k.
    ex 3: your NZ tax is 5k. the tax you paid in HK is equivalen to 7k in credit. Then you owe nothing.

    This is my understanding of it. You should probably ask an accountant to be sure.

    Also technically, you are not taxed in HK for the income if generated outside. So I don't think that counts as double taxation.

    shri likes this.

  9. #9

    Join Date
    Apr 2016
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    244

    The way I understand it (not an accountant) is that while the HK company will pay company tax according to HK taxation rules, any income that you derive from the company will be subject to NZ tax as you are a NZ tax resident. The company and you as a person are separate entities. So whilst you may have to pay less company tax, perhaps your personal tax might be higher. If you have the company in NZ, then you might be able to use reduce your personal tax liability by leveraging business expenses as tax deduction (ie your company is based in your apartment so part of your mortgage/rent can be offset, etc).


  10. #10

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    Sep 2018
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    Thanks. Will talk to an accountant

    MABinPengChau likes this.