Issued
03 Jul 2020

Overview – Tax issues arising from owning foreign residential rental property

If you own a foreign residential rental property, you probably need to pay tax on the rental income in both New Zealand and in the country where the property is located.  Working out what tax you need to pay in New Zealand can be difficult depending on your situation.

To help you out, we have published three items that explain different aspects of working out your obligations: IS 20/06IS 20/07, and FX 20/01.

  • Complexities can arise between the way your income is calculated in the country where the property is and the way your income from that property is calculated in New Zealand.
  • If your foreign residential rental property is financed with a foreign currency loan, New Zealand’s Financial Arrangements rules (FA rules) may mean you need to account for both the interest you paid or incurred on the loan as well as any foreign exchange gains or losses made on the loan.
  • If you pay tax on income from your foreign residential rental property both in New Zealand and overseas, you may be entitled to claim foreign tax credits in New Zealand for the tax paid overseas.  Calculating the foreign tax credits able to be claimed in New Zealand is complex.

These three items explain different aspects of working out your obligations:

IS 20/06: Tax issues arising from owning foreign residential rental property

This interpretation statement explains how to translate your foreign income and expenses into the correct amount for New Zealand tax purposes.

IS 20/07: Application of the financial arrangements rules to foreign currency loans used to finance foreign residential rental property

This interpretation statement explains your obligations if your foreign residential rental property is financed with a foreign loan and you have to use the FA rules.

FX 20/01: Approval – foreign residential rental property amounts – currency conversion

This determination approves some simplified methods and foreign exchange rates sources that you can use to convert your foreign residential rental property income and expenses to New Zealand dollars.