Navigating International Tax Obligations for New Zealand Businesses

Are you doing business globally or got your sights set on international expansion? Most overseas income is taxed in New Zealand. It’s important that you fully understand your obligations to stay compliant and avoid penalties.

In this blog, we’ll look at different forms of foreign tax and how it applies to NZ tax residents and outline ways to better manage cross-border transactions in multiple currencies.

Table of contents
Key obligations for corporate taxes in NZ Tax considerations for transactions in foreign currencies Effective ways of managing international taxations Types of international taxation Manage your foreign currency transactions - Wise Business

Key obligations for corporate taxes in NZ

If you’re operating overseas, or plan to, there are tax laws that you must comply with as a business based in New Zealand. These rules are overseen by the Inland Revenue Department (IRD).

GST (Goods and Services Tax):

When you sell something to a customer or business in New Zealand, you will typically add a 15% Goods and Services Tax (GST) on top of the price¹. This isn’t the case for zero-rated exports². For example, you don’t have to charge GST if you sell a product to someone in Australia. However, you do have to tax the foreign income you receive from that transaction.

GST does not apply to sending or receiving money overseas if it’s not part of a purchase or sale.

Check out the article on business tax rates in NZ for 2025

Income tax on foreign income

New Zealand tax residents are taxed on worldwide income³. Under the Income Tax Act 2007, all the money you earn overseas must be converted to New Zealand dollars and included in your tax returns. This includes income that doesn’t enter the country, such as money or interest earned in a foreign bank account or reinvested overseas.

All foreign income is taxed at the same rate as income earned in New Zealand. This can vary depending on the business type, but generally, it’s a 28% corporate tax rate for companies, and a progressive personal income rate for self-employed individuals and sole traders.

Foreign tax credits

You can apply for and claim foreign tax credits for any tax you’ve already paid on overseas income⁴. This prevents you from having to pay tax on the same income twice. New Zealand currently has double tax agreements (DTAs) with 41 countries, including Australia, to simplify cross-border trade and provide relief from double taxation⁵.

You can refer to the Inland Revenue’s foreign tax credit fact sheet to determine whether you can claim a foreign tax credit.

Tax considerations for businesses with transactions in foreign currencies

All income you earn must be taxed. This includes transactions in foreign currencies for goods and services. As part of your tax obligations, you’ll need to convert any currency into NZD and declare it accordingly.

Let’s take a look at the main considerations for tax purposes when dealing with foreign currencies.

Currency conversion

You must report all of your transactions — income, expenses, tax credits — in NZD, even those made in a foreign currency. In order to do this, you need to convert your money into NZD. The Inland Revenue states that businesses are “free to choose” how they convert foreign currency.

You can use a traditional bank, or solution like Wise Business which allows you to hold and convert money in 40+ currencies. In addition, Wise Business helps cut out manual data entry through its accounting software integration feature. This allows businesses to automatically sync their foreign currency transactions with popular accounting tools like Xero, Quickbooks, and others for efficient tax filing.

There are cases when a specific currency conversion method is required. These include transactions subject to special foreign investment fund or financial arrangement rules.

Exchange Rates

There are three exchange rate types you can use when converting currency. These are:

1. The rate on the day the transaction was made
2. The average rate over a 12-month period
3. The rate at the middle of a particular month

The right method for your business depends on the nature and timing of your transactions.

• You should use the daily rate for those involving GST for tax reporting, as foreign currency must be converted at the time of supply by law⁶.
• A 12-month average is useful for consistency during a full financial year.
• The mid-month rate is typically reserved for businesses with irregular accounting periods, either longer or shorter than 12 months.

Transfer Pricing

There are tax rules for transactions between related parties of the same business located in different parts of the world. For tax purposes, multinational enterprises (MNEs) must charge fair prices and report transactions correctly when transferring any goods, services, or assets to places overseas⁷.

This is known as transfer pricing. It states that MNEs must conduct business at “arm’s-length” in the same way they would with an unrelated party.

Inland Revenue has a governance checklist you can use to ensure you meet transfer pricing rules for cross-border transactions between related parties.

Tax Treaties

To ensure foreign income isn’t taxed twice, New Zealand has established double tax agreements (DTAs) with 41 countries, including Australia and the UK⁵. Each of the agreements has a mutual agreement procedure (MAP). These help businesses resolve issues related to double taxation, such as how income tax rights should be divided between two countries.

Effective ways of managing international taxations for businesses

As you can see, international tax is a complex topic that requires careful management. Some of the things to keep in mind when managing international taxations include:

1: Effective record keeping

You must keep detailed records of all foreign transactions. This includes the methods and exchange rates used to convert foreign currency into NZD. Accurate records are critical for tax compliance.

This is where foreign money transfer tools like Wise Business play a role in international business transactions:

• Transferring currency into NZD at the real exchange rate with transparent fees and no hidden markup on the exchange rate.
• Providing detailed and complete transaction reports showing the amount of currency converted and the exchange rates used.
• Sync your foreign transaction data automatically with your accounting software

2: Seek professional advice

Making sense of your overseas tax obligations can be challenging. It’s important to get advice from tax professionals to help your business report cross-border tax correctly and avoid costly mistakes. They can also offer advice on structuring your business in a way to legally minimise your tax liability through any available incentives, treaties, and credits.

ℹ️ You might be eligible for tax incentives or reliefs available to NZ businesses that conduct international trade. Do consult with a professional to better understand the types of incentives your business could be eligible for.

3: Automate processes

Manually completing all tax activities is very time-consuming, especially if you are going back and forth to compare records. Automation provides real-time access to financial data, enabling you to make informed decisions quickly. This is particularly important for businesses operating in fast-paced international markets.

For instance, by integrating your multi-currency accounts with accounting software, you’re able to track, report, and reconcile all foreign business transactions. This takes the manual effort required to work out the exact currency and conversion rate required for tax reporting and provides a complete audit trail.

Types of international taxation

When it comes to taxing foreign income, Inland Revenue outlines two main categories⁸:

• NZ businesses with overseas income that must declare all foreign income and pay NZ tax on it, pending relief from double taxation and foreign tax credits.
• Non-NZ businesses with NZ income that may be taxed if their income comes from sources in New Zealand.

Let’s look at some specific types of income that may be liable.

International business incomes liable for tax in NZ

It’s important to understand how New Zealand tax rules apply to money you earn overseas. This includes income from operating online or remotely.

Interest and dividends

You must declare and pay tax on all interest and dividends earned from both NZ and overseas accounts and investments⁹.

Online trading

Online trading is the same as any other form of business. You must pay tax on income earned globally from things like dropshipping, importing and reselling, and affiliate marketing. There’s no minimum income threshold¹⁰.

Trading stock

If you run an ecommerce store or dropshipping business, any goods you buy for resale are classed as trading stock and must be valued and disclosed for tax purposes¹¹.

Income from foreign investment funds

The New Zealand government recently proposed new changes to foreign investment fund (FIF) rules, which relate to funds or shares in foreign companies. A new ‘revenue account method’ will now be used to calculate what should be taxed.

NZ corporate tax rate for different business types

The corporate income tax (CIT) rate in New Zealand is 28%, which is the standard, flat rate for most companies³.

• Trusts are taxed at a 39% rate for income that’s earned and retained by trustees.
• Sole traders are taxed as individuals at the progressive rate for personal income
• Partnerships share the profit and loss between partners and pay income tax at the progressive rate for individuals

Inland Revenue has more guidance on tax rates for businesses in New Zealand.

Manage your foreign currency transactions with Wise Business

Earning money from overseas doesn’t exempt you from tax obligations in New Zealand. Most international income is liable for tax. There are usually specific considerations and rules depending on business type and income and interest earned, so it’s critical to fully understand and meet your tax obligations by talking to a trusted expert.

Wise Business can serve as a tool to make it easier for your business to stay tax compliant. Here are some features you can access with our Business account:

• Free to register — Hold and convert between 40+ currencies. Send to 140+ countries
• Debit and expense cards for you and your team, which you can use in 150+ countries
• Multi-user access for team members, with ways to control and manage permissions
• Pay up to 1,000 people at once with the Wise batch payments feature
• Integrate with your favourite cloud accounting solutions like Xero, Quickbooks, and more
• Get account details to receive in 8+ currencies for a one-time fee of 40 NZD

Sign up for the Wise Business account! 🚀

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Sources:

1. Inland Revenue - What is GST
2. Business Gov NZ - GST tax
3. PWC - Taxes on corporate income
4. Inland Revenue - Double tax agreements
5. Inland Revenue Tax Policy - Tax treaties
6. Inland Revenue - Overseas currency conversion to NZ dollars
7. Inland Revenue - What transfer pricing is
8. Inland Revenue - Multinational enterprises PDF
9. Inland Revenue - Interest and dividends
10. Inland Revenue - Online trading
11. Inland Revenue - Trading stock

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This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Wise US Inc. or its affiliates, and it is not intended as a substitute for obtaining business advice from a Certified Public Accountant (CPA).

This guide does not constitute tax advice. Get professional tax advice and guidance from your lawyer or tax advisor when selling your property.