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What is overseas inheritance tax?

A New Zealand tax resident may be taxed if they receive monies from an overseas inheritance – this may be taxable as income.

When overseas inheritance tax is charged

  • Overseas inheritances and distributions from overseas trusts are taxable if any part of the distribution represents income. In this context income is defined as income calculated for New Zealand tax purposes.
  • Sometimes capital gains in another jurisdiction (country) become classified as income in New Zealand because of FIF or financial arrangements rules.

Does overseas inheritance tax apply to me?

Any person or trust which receives an amount from an overseas trust or deceased estate is subject to these rules.

Examples of the overseas inheritance tax in use

Your mother dies in Australia and when her estate is distributed to you it includes income for the period during which the estate was being managed by her executors (from the date of death to the date of distribution). This income is taxable.

Ways people get overseas inheritance tax wrong

  • You receive a “gift” from an aunt in the United Kingdom and it turns out that the gift was a distribution from a trust your aunt had set up. In this case the gift will be taxable as income.
  • The assumption that the UK tax rules are the same as in New Zealand – capital gains in the UK might represent Foreign Investment Fund income in New Zealand.

Recent changes to overseas inheritance tax

No recent changes to this tax.

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