Overseas Income and Double Tax Agreements in New Zealand
How overseas income is taxed for NZ residents — reporting foreign income, claiming foreign tax credits, and how double tax agreements prevent being taxed twice.
Published 10 March 2026
If you’re a New Zealand tax resident earning income from overseas, you’re generally required to pay NZ tax on that income. But what happens when the other country has already taxed it? Double tax agreements (DTAs) and foreign tax credits exist to prevent you from being taxed twice on the same income.
NZ Tax Residents and Worldwide Income
New Zealand operates a worldwide income tax system. If you’re a NZ tax resident, you must declare and pay tax on all income, regardless of where it’s earned. This includes:
- Overseas employment income
- Foreign rental property income
- Overseas business income
- Foreign investment income (interest, dividends, royalties)
- Pensions from overseas
The income must be converted to New Zealand dollars using the exchange rate on the date received (or an approved average rate for the period).
What Are Double Tax Agreements?
DTAs are treaties between New Zealand and other countries that set rules for which country can tax specific types of income. New Zealand has DTAs with over 40 countries, including:
- Australia, United Kingdom, United States, Canada
- Japan, China, South Korea, Singapore
- Germany, France, Ireland, Netherlands
- India, Malaysia, Thailand, Indonesia
Each DTA specifies rules for different income types — some income may only be taxed in one country, while other income can be taxed by both (with a credit mechanism).
How Foreign Tax Credits Work
When you pay tax on overseas income in both the source country and New Zealand, you can claim a foreign tax credit in your NZ return to avoid double taxation.
Example: You receive $10,000 of UK rental income. The UK taxes it at 20% ($2,000). NZ tax on $10,000 at your marginal rate of 33% would be $3,300.
- NZ tax liability: $3,300
- Foreign tax credit: $2,000
- NZ tax to pay: $1,300
The foreign tax credit is limited to the lesser of:
- The actual foreign tax paid, or
- The NZ tax payable on that income
You cannot use excess foreign tax credits to reduce NZ tax on your domestic income.
Common Types of Overseas Income
Employment Income
If you work temporarily overseas, your employment income may be taxed by the other country. The DTA determines which country has the primary taxing right — often based on where the work is performed and how long you’re there.
Dividends
Most DTAs allow the source country to withhold tax on dividends at a reduced rate (commonly 5-15%). You declare the gross dividend in NZ and claim a credit for the foreign withholding tax paid.
Interest
Similar to dividends, DTAs typically limit the source country’s withholding tax on interest to 10%. The gross interest is included in your NZ return with a credit for foreign tax.
Rental Income
Foreign rental income is generally taxable in both countries. You pay tax in the country where the property is located and claim a credit in NZ.
Pensions
DTA treatment of pensions varies significantly by country. Some DTAs assign taxing rights exclusively to the country of residence (NZ), while others allow the source country to tax pensions.
Reporting in Your Tax Return
Report overseas income in your IR3 tax return:
- Declare the gross overseas income in NZD
- Claim the foreign tax credit in the appropriate section
- Attach or retain evidence of foreign tax paid
If you have foreign investments worth more than $50,000 in total, you may also need to consider the Foreign Investment Fund (FIF) rules, which apply a different calculation method.
Transitional Residents
If you’re new to NZ and qualify as a transitional resident (up to 48 months), most foreign-sourced income is exempt from NZ tax. This gives new arrivals time to restructure their affairs.