Tax and Residency relating to ships flag
I am a NZ citizen, have been out of the country majority of the last 24 months working on a international, Cayman Island flagged yacht. I have no assets or substantial ties with NZ. I have considered myself a non tax resident of NZ for last 24 months.
My question is, as i am travelling in international waters for majority of each year, what is my tax residency?
Is it posible to consider myself a tax resident of the Boat's flag state (Cayman Islands)? Further, when filling paperwork, can I put the boat's address in Cayman Islands as my 'address for tax purposes'?
I would like to be legal, however find this situation to be an extremely grey area (as I am sure many yacht crew do also).
Are their any other Kiwis in a similar situation?
Cheers for any help
I have read your post and can offer the following advice. The Flag State of a vessel is considered as a legal entity in maritime law and to date no statue or precedence has been established by which a crew member can claim this to be their tax residency. I recognise that tax & residency in yachting is not always a clear & concise as one would like.
If you require further advice please feel free to visit our website below or email:
You shouldn't worry about your tax residence or paying tax. I am also a kiwi and have a great accountant who use to work for I.R.D. As you have been out of the country for more than 326 days and have no assets in N.Z you are not liable to tax earned on overseas income. You are legal as N.Z does not tax on world wide income. I took in a substantial amount of U.S.D and purchased property without any problems. I would advise asking a New Zealand based accountant as to the up to date laws. My accountant has advised me that once you lose your tax residency you are not liable to pay tax on your off shore earnings.
Cheers for that info. I agree that under the 325 day rule, and not having an endearing relationship you should therefore be a 'non resident for tax purposes'
My problem of late has been that anytime I fill out any paper work or talk to a bank/ird they ask me if I am not resident of NZ, then where am I resident of? - and to provide an address. If we are forever moving internationally on the yachts, and have no land ties, then where can we provide an address for tax purposes, or a country of tax residence?
Mike, would you be able to recommend an Accountant in Auckland area - as I am there for a short time and have some paper work to sort. That would be much appreciated. You can private email me on
Patrick, thank you also for your information.
I am going to assume NZ and Australian tax residency laws are quite similar. Maybe they are not but I do think I heard that somewhere.
You consider yourself a non resident of NZ. In Oz if you want to be a non resident it means you must be a resident somewhere else. In that somewhere else you are also expected (I think it is law) to be paying tax. Thats what residents do. They pay tax.
You want to avoid this by claiming your boat as you "permanent place of abode". This is the term the tax office use. In Australia this has been faught in court and the general conclusion is that a ship or barracks can not be a permanent place of abode. This seems to ruin your boat idea and judging by the post above you can't claim the flag state of the boat either.
Next you should be thinking about where you stay when you are not on the boat. If you return to Australia then it won't help you either.
Basically to be a non resident you need to establish a legit residence in another country. Pay taxes there. Have a residence in your name (not hotel). Not be there on a tourist visa or visa exempt status. This needs to be your domacile and true home. Assets. Marriage. Family. Bank accounts. Maybe a car license. These are things you need.
Then think about breaking your nz residency by removing yourself or at least seeking advice from public healthcare and super funds. Closing all your bank accounts. Having no address. Filing your final tax return.
And if you have all the above then how will you pay tax in your new country of residence if you don't work there and only spend (lets say) 2-4 months there per year. A lot of countries require you to spend 6 months to be eligible to pay tax.
Im not professing to be an expert at all. And Australia is obviously not new zealand. But it does sound like you are kidding yourself a bit.
I felt the same as you and still do but I have since aquired a lot of things above and built a bit of a case for myself.
I you are a non resident then you should have done a final return when you left nz. If you havnt then you should contact a specialist accountant to do this for you and I suspect they will tell you a similar story.
I actually tried a few dumb accountants first that were going to do it without really asking me anything about my residency. I shopped around until I found a guy that did ask and clarified everything.
Its very grey area and I know where your coming from.
I you don't do anything and return to nz then you should declare it when you are back there before they find out the other way around and it wont be as pleasant. They are more lenient if you declare first i think.
Thank you for your input chiko_roll
I admit that while part of me feels bad and perhaps a 'system cheater' for seeking this particular advice, another part of me struggles with the idea of paying tax to a country (NZ) that I only visit on occasion, if at all. The only connection I have to NZ currently is a static Kiwi Saver account (which is paying tax on its interest by the way, and I believe can't be relocated until I have established residency elsewhere). I did indeed do a final return when I left NZ in 2015 and informed IRD. There is every chance than in a few years I will decide to settle and become permanent resident of another country, in which case I will have been paying tax to NZ yet never gaining benefits from doing so.
An accountant I talked to today stated that in NZ the 325 day rule and not having an endearing relationship (assets, family, clubs etc) is enough to declare someone non resident. Yet, as you say, in Australia I believe if you do not have residence in another country then it returns to your Domicle (AUS).
Interestingly, I have heard that if a vessel is in a country's waters (say, USA for example) for more than 180 days, then the crew must pax tax in that country, regardless of their residency. Not sure the truth of this, and perhaps its only commercial vessels.
The UK have got it right, where they have a Mariners sub section - who fit in the system, pay tax, and are able to make claims back if they are out of the country for a certain number of days. Simple and clear.
Of course I have all intention that if I do return to NZ, or purchase property there, to declare my residency to IRD.
hey chiko roll, you have it all SPOT ON... and although you say in the last line that it is a grey area, it is NOT acutally...
you MUST have a perm place of abode, a yacht is NOT that.... nor is living a few months in another country...
as for simply claiming that you have been away for months, even years is still not enough... even if you do like I did, living land based in a house, with a residency visa in DUBAI, for more than a year... (and Dubai has no tax requirements), you still have to pay tax SOMEWHERE, and the Aust ATO wants their share... even thou you may technically pay what is legally required in another country, if that total is less than what you would pay in Australia, you have to give the ATO the make up amount....
yes NZ may be different, but it is VERY hard to be totally tax free....
The ATO has several tests, if you pass one or 2 of them, you have to continue and pass all of them, or you are NOT a non tax resident.... simply by having relatives like your parents in Australia means you will find it very hard to be a true non tax resident...
and btw, the Australia Tax Office view all these types of posts... they are not stupid and see who is posting what... I can guarantee if they see an Aussie post about this, they will go do a search on you that same day to see what you are up to... and on top of the fact that a few months ago they declared that they are intentionally targeting boat crew...
maybe only 1 in 100 crew will get caught, but as chiko roll and others have said, not many tax agents or accountants really know the requirements under the Australian system anyway... I have seen a few, years ago, and they said XYZ, until I produced print outs off the ATO site that said different to what they were ADVISING me to do... take care.
I may have it spot on and have learnt a lot spending hours studying this rubbish online and asking so many different accountants, tax lawyers and "experts".
It cost me almost $1000 to do my final return. I have the return out of the way and have written to a lot of these experts to try and find someone to prepare written advice confirming that I am indeed a non resident as I believe I am.
I have no confidence in most of these experts. Some have even had the reassured me that I am fine as I live on a boat. Thank god I didn't listen.
It seems silly to be writing to people to third parties and asking questions that we should just be able to ask the tax office themselves. $5000 dollar flat fee is the last quote I was given by waterhouse tax lawyers in Aus for advice.
I have wasted probably a hundred or more hours of my time learning, studying, sending emails and worrying about this and I still don't have any certainty.
I wish I lived in a place like the UK or africa where they have no issue and a clear system.
I say it is a grey area but if not grey then perhaps obscure would be better? Trying to understand this stuff takes hours. I still have a lot of questions. If I want to know more about this law that one needs to paying tax somewhere then where do I do it. Spend hours googling around wasting my life or pay somebody $5000 for the answer to a simple question. Its frustrating.
The government is incredible and I am happy i don't return to the place anymore.