Moving to New Zealand-Non Registered Accounts

Income tax policy, rules, problems, strategy and software. Property and consumption taxes too.
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Tigerman
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Moving to New Zealand-Non Registered Accounts

Post by Tigerman »

Hi everyone,

I wanted to ask someone about this situation. I have been offered a position in New Zealand and I'm hopefully looking to make the move within the next couple of months.

I'm aware of the CRA deemed disposition rule, I know I would pay a capital gains tax on any non-registered stock investments but I could unwind it at a later date when I return to Canada. Not really a deal breaker for me. But what I'm not sure about and what concerns me is that while I would have a 'deemed disposition', I do not want to in reality sell my assets off and close my accounts. They are there for retirement, long term purposes and I am very happy with what I've set up and would like to keep it that way.

I've heard the US is quite strict about selling things off, which makes no sense. What if you go and then return within say a year, while having been forced to sell everything off? I deal with TDDI so I was wondering if anyone knew what the rules might be with non-registered accounts while living in New Zealand. Can I keep what I have in Canada without having to close everything or do the same silly rules apply to NZ as they would to the US? My intent is to be gone for a few years and return.

Any insight on this would be really appreciated! Thanks
vandefrosty
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Re: Moving to New Zealand-Non Registered Accounts

Post by vandefrosty »

New Zealand taxes worldwide income as Canada does, but has a concessional arrangement for newcomers and returning expatriate NZers.

http://www.ird.govt.nz/income-tax-indiv ... n-inc.html

It lasts for four years from when you first become NZ tax-resident (which can be before you 'move' there if you have visited the country for an extended period in the previous 12 months, so beware), and exempts you from NZ tax on non-employment income arising outside NZ. It's switched on automatically the first time you are eligible for it, so it cannot be deferred. You can only use it once, and will expire at the end of the month four years after you qualified for it.

If you stay longer than four years, I think that NZ won't recognise the tax shelters of RRSP or TFSA and will treat all income as taxable (there is no capital gain tax in NZ however). Worse, NZ applies a Foreign Investment Fund regime that deems most foreign investments generate income of x% (typically set to match the comparatively high dividend yield of the NZX) , even if they don't yield anything at all, and taxes you on that.

So NZ won't force you to sell anything, and gives you a break on NZ taxes for the first four years. But after that NZ tax applies to registered AND non-registered accounts, and the FIF regime has some unappealing features. Professional advice might be helpful (I use a guy in Wellington whose details I can share on request).

My experience on becoming non-resident of Canada is that Canadian brokers are prohibited from trading some products (Mutual Funds?) for non-residents. Talk to yours about the limitations. It would seem sensible to trade out of those holdings before you go - or be comfortable that you will be unable to trade them until you return.

Greg
Tigerman
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Re: Moving to New Zealand-Non Registered Accounts

Post by Tigerman »

Thanks for the reply, Greg. Much appreciated.

Sounds like the first 4 years are actually pretty good. After that, gets a bit dicey in terms of tax but that's a long ways off. Seems like it would be dividend income that would be impacted. I'd likely deal with this later on.

I deal with TD. Moving to the US would require you to actually sell off all of your holdings into cash, which is ridiculous as it just creates so much more hassle. With NZ, at least you can keep your accounts based on what they told me, security regulations aren't as heavy handed. That's important to me, you never know how life unfolds but the goal is to come back to Canada at some point and retire down the road. So, the way I've structured my non-reg, I'm happy with and don't want to mess with it.
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