This is vital to international trade and modern economies. But some people try to use this flexibility to avoid paying the right amount of tax.
Most of us know that paying the right amount of tax is important. The government uses it to provide things we all need – like hospitals and schools.
That's why the New Zealand government has joined an OECD initiative to combat global tax evasion. It's called the Automatic Exchange of Information or AEOI.
We're one of more than 100 countries that have agreed to share foreign tax residents' financial account information as part of AEOI. This means it will be even harder for people to try to evade tax by hiding money or investments overseas.
How information sharing works
Since 2017 financial institutions – like banks and some investment managers – have been collecting information from customers to figure out if they're foreign tax residents and to support AEOI. This information includes their customers' names, birth dates, addresses, tax residence, tax identification numbers, account details and gross income on any investments.
Financial institutions will share this information with Inland Revenue each year. Then Inland Revenue will share it with each person's home country, if it's an AEOI partner. In return, Inland Revenue will receive financial information from AEOI partners about New Zealand tax residents who've earned money overseas.
What could this mean for you?
If you're a New Zealand tax resident with a bank account or investments overseas, your information may be shared with Inland Revenue. So now's the time to check you're paying the right amount of tax. If you need help getting your tax right, talk with a tax agent or accountant.
If you sign up for a new bank account in New Zealand, your financial institution will ask some extra questions about your tax residence.
AEOI makes evading tax even harder
At the end of the day, AEOI or Automatic Exchange of Information is about making global tax evasion even harder and helping to ensure that people pay the tax they should.
If you want to find out more about AEOI or tax residency, visit ird.govt.nz/infoshare for more information.