Contracting with foreign companies

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dzh

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#205521 16-Nov-2016 16:08

What are the requirements if you want to do work for foreign companies?

I am currently working locally, but might get some remote work eventually. That would make me more location independent.

My understanding opening sole trader would be enough.

Then just pay the taxes just as you'd get business locally?

p.s. Is there any requirements to be a resident? I am currently here on a work visa.

Soon 2 year term will complete and I'll be able to continue on my own and after 2 years of tax residence, gain permanent residence.

But wondering what is the requirement for the time being?

Dynamic

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#1672208 16-Nov-2016 16:29

I would play this safe, and:
- divert 30% of your international earnings into a separate tax account unless a professional accountant tells you otherwise
- get professional accounting advice early

The vast majority of accountants will have a free chat with you.

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mdf

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#1672213 16-Nov-2016 16:37

New Zealand taxes you on your world wide income. If you were going down the sole trader route (and there are pros and cons to that vs incorporating a company) you'd need to declare overseas income on your annual IR3 form which would then be taxed at your marginal tax rate. If you do enough of this, you will also be up for (the much loathed) provisional tax.

Depending on what you do and how much you invoice, you may also have to register for GST. Depending on what you do, the "export" of services is usually zero-rated though.

But then overseas companies may have different rules about income and sales tax. Which is then compounded by double tax agreements. And I don't know what work visas do to this either.

So basically what @Dynamic said. Talk to an accountant.

surfisup1000

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#1672292 16-Nov-2016 18:41

Dynamic:

I would play this safe, and:
- divert 30% of your international earnings into a separate tax account unless a professional accountant tells you otherwise
- get professional accounting advice early

The vast majority of accountants will have a free chat with you.

Save more than 30% in tax, our tax rate is 33%.

Unless you have a presence in the other country i doubt they will tax you. Especially so if there is a double tax agreement in place.

You won't need to collect gst but you can claim GST on expenses.

dzh

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#1879363 8-Oct-2017 13:20

surfisup1000:

Dynamic:

I would play this safe, and:
- divert 30% of your international earnings into a separate tax account unless a professional accountant tells you otherwise
- get professional accounting advice early

The vast majority of accountants will have a free chat with you.

Save more than 30% in tax, our tax rate is 33%.

Unless you have a presence in the other country i doubt they will tax you. Especially so if there is a double tax agreement in place.

You won't need to collect gst but you can claim GST on expenses.

Well, my employer/client is based in US. I've recently got residency (came from Europe on talent/work visa).

To keep my residency status I need to either live here 180 days or be a 'tax resident' for 41 days.

This is where things get really murky. You need to setup NZ as a permanent abode. Most explanations focus on owning property and people actually living abroad.

There's no way I can afford any property here and ideally I'd only stay here for 41 days, than 180.

How do I get to know whether I'd be considered a tax resident? In most cases people seem to try avoid that :D

kryptonjohn

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#1879399 8-Oct-2017 14:25

Aside from being exempt GST, there's nothing special about overseas income. Just treat it the same as your NZ contracting income whether you are a sole trader or a company.

IOW estimate your annual profit after expenses and put aside a tax provision.

To me the biggest issue is getting paid. How well do you trust the client? I'd be careful about payment terms, and not accruing to much of a current AR asset with them in case they turn out bad.