The Inland Revenue Department (IRD) does not automatically deduct a portion of the money deposited into your bank account for tax purposes. You’ll need to declare this income yourself.
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“I’m currently working on projects that involve training new AI models and I’m getting paid in USD via PayPal. I plan to regularly deposit this money into my New Zealand bank account. In the past, my taxes were handled through my employer using my IRD number, so I didn’t have to manually declare my taxes. Now, I’m unsure about the tax process for my current income. Does the IRD automatically deduct a portion of the money deposited into my bank account for tax purposes? Sorry if this questions sounds ignorant. I’m still pretty young and I’m not well aware of the due process. Cheers”
(Original question on Reddit)
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No worries at all! it’s great that you’re asking these questions! When it comes to taxes, it’s always better to be informed.
If you’re a New Zealand tax resident, you need to pay tax in New Zealand on your worldwide income, even if you did not bring the money into this country. This includes income from overseas, such as the payments you’re receiving via PayPal for your work.
The Inland Revenue Department (IRD) does not automatically deduct a portion of the money deposited into your bank account for tax purposes. You’ll need to declare this income yourself.
You’ll need to file an individual income tax return – IR3 at the end of every tax year you receive income from overseas. This includes completing the Overseas income summary – IR1261 – with the breakdown of your income and tax credits.
If you’ve paid tax to another jurisdiction on your overseas income, you might be able to claim a credit in your individual tax return. If New Zealand has a double taxation agreement (DTA) with the other jurisdiction, you or your tax agent should check how this affects your tax.
International tax can be complex and you may want to consult a tax professional if you’re in doubt about your situation.
Hope this helps.
Regards, Clive Fernandes (Financial Adviser)
Director – National Capital
Disclosure: I am the director of National Capital, a KiwiSaver advice firm. The views expressed in this article are the views of the author. The information provided is of a general nature and is not intended to be personalised financial advice. You may seek appropriate financial advice from a Financial Adviser to suit your individual circumstances or contact National Capital.
