NZers with Kiwisaver moving to the US

[visacats 9]

Hi,

 

I have an old Kiwisaver account which is not currently receiving any contributions. I am looking to emigrate to the US later this year with a green card.

 

It looks like the filing of this under US taxes could be complicated - does anyone here have previous experience of filing US taxes with an open Kiwisaver? How did you do it?

 

Obviously the other option is to close it, with the forfeiture of previous government contributions (and anyway I may as yet end up back in NZ one day).

[Jacq1227 12]

Couldn't find much about kiwisaver declaration on US tax filing. Based on my research there are some forms that are required Form 3520/3520A and/or Form 8938. But those forms are very confusing. Has anyone successfully declared their kiwisaver on US taxes? Thanks!

[visacats 9]

7 hours ago, Jacq1227 said:

Couldn't find much about kiwisaver declaration on US tax filing. Based on my research there are some forms that are required Form 3520/3520A and/or Form 8938. But those forms are very confusing. Has anyone successfully declared their kiwisaver on US taxes? Thanks!

 

Forgot I'd started this thread. I moved to the US in 2023, so I'm now looking at my first year of filing US taxes. Nightmare.

 

Basically, I have found that searching for this tends to bring up accountancy websites who form an opinion that Kiwisaver is a foreign trust and 3520 and/or 3520A must be filed. In addition, the funds that Kiwisaver invests in may be considered PFICs triggering form 8621, which looks like a complicated form to complete and may also mean that Kiwisaver gains are taxed punitively.

 

It appears that the IRS created an exemption for forms 3520/3520a for foreign trusts that are formed for the purpose of retirement saving. See section 5.03 of Rev. Proc 2020-17 https://www.irs.gov/pub/irs-drop/rp-20-17.pdf. However, it appears that Kiwisaver does not technically meet all of those criteria, as (1) there is not a contribution limit that I'm aware of and (2) individuals can make contributions from non-employment sources. So it appears Kiwisaver does not match the criteria of 5.03(3) and 5.04(4).

 

There are good examples of this type of analysis here: https://www.nzustax.com/lets-take-a-deep-dive-into-kiwisaver/ and here https://cloudtax.co.nz/articles/10/08/20/kiwisaver-and-us-tax

 

But these articles are all written by people who want expat business, and in my view there's a clear motivation for them to explain how complicated things are in order to encourage people to use their services.

 

Part of the claim is that the US-NZ tax treaty does not deal with Kiwisaver. But I think it does. Looking at the US-NZ tax treaty for pensions, it says:

 

Quote

ARTICLE 18 Pensions and Annuities      1. Subject to the provisions of Article 19 (Government Service) (a) Pensions and other similar remuneration derived and beneficially owned by a resident of a Contracting State in consideration of past employment shall be taxable only in that State; and (b) Pensions and other payments made under the social security legislation of a Contracting State to a resident of the other Contracting State or a citizen of the United States shall be taxable only in the first-mentioned State.      2. Annuities derived and beneficially owned by a resident of a Contracting State shall be taxable only in that State. The term "annuities" as used in this paragraph means stated sums (not being alimony) paid periodically at stated times during life or during a specified or ascertainable number of years, under an obligation to make the payments in return for adequate and full consideration (other than services rendered or to be rendered).

-- https://www.irs.gov/pub/irs-trty/newzld.pdf

 

So what's the definition of a pension? In 2008 the US-NZ tax treaty was updated to with a new protocol, which includes a definition of pensions:

 

Quote

(l)     the term "pension fund" means any person established in a Contracting State that is: (i)     operated principally either: (A)     to administer or provide pension or retirement benefits; or (B)     to earn income for the benefit of one or more persons described in clause (A); and (ii)     is either: (A)     in the case of New Zealand, a superannuation scheme registered under the Superannuation Schemes Act 1989, a KiwiSaver Scheme registered under the KiwiSaver Act 2006, the New Zealand Superannuation Fund, or the Government Superannuation Fund; or (B)     in the case of the United States, generally exempt from income taxation in the United States;

-- https://home.treasury.gov/system/files/131/Treaty-NewZealand-Protocol-12-1-2008.pdf

 

There is an additional technical explanation document which was published alongside the 2008 protocol, which states:

 

Quote

Subparagraph (l) defines the term "pension fund" to include any person established in a Contracting State that is operated principally to administer or provide pension or retirement benefits or to earn income for the benefit of one or more such arrangements and in the case of the United States is generally exempt from income taxation.  In the case of New Zealand, the term refers to a superannuation scheme registered under the Superannuation Schemes Act 1989, a KiwiSaver Scheme registered under the KiwiSaver Act 2006, the New Zealand Superannuation Fund, or the Government Superannuation Fund.

-- https://home.treasury.gov/system/files/131/Treaty-NewZealand-Protocol-TE-11-6-2009.pdf

 

So my read of this is:

1. pension funds established in a state (NZ or US) are only taxable in the state (as per 1982 tax treaty)

2. Kiwisaver is explicitly defined as a pension fund in the 2008 protocol and technical explanation documents.

 

Seems pretty clear to me.

 

At the moment, although I am still researching this, I am intending to declare my Kiwisaver on FBAR and form 8938 (so I will still be fully disclosing my global financial position) but not complete forms 3520/3520 or go down the 8621 PFIC rabbit hole because I believe the US-NZ tax treaty explicitly protects Kiwisaver from taxation by the US.

Edited January 23 by visacats

[Jacq1227 12]

Thank you for sharing the information you've got. I've used chatgpt last night and I've mentioned the Kiwisaver provider I am with. 😁 It said that I don't need to file form 3520/3520A for individual contributions since Kiwisaver accounts are not classified as foreign trusts for individual contributors.

 

If you are an individual contributing to your on Kiwisaver account, primary reporting will be Form 8938 (if you exceed the threshold) and FBA (if you exceed the threshold of $10k usd)

 

But what is confusing is that Kiwisaver has 3 parts, individual contribution, employer's contribution and government. What should be declared on those forms? The total amount of those 3?

 

And I read something online that if individual contribution is higher than the employer's contribution it is considered as non-guarantor trust and be required to file 3520A and Form8938 (if exceeds 100k threshold)

[KK_Shanks 7]

On 1/24/2024 at 7:42 AM, visacats said:

At the moment, although I am still researching this, I am intending to declare my Kiwisaver on FBAR and form 8938 (so I will still be fully disclosing my global financial position) but not complete forms 3520/3520 or go down the 8621 PFIC rabbit hole because I believe the US-NZ tax treaty explicitly protects Kiwisaver from taxation by the US.

How did you go with your first tax filing?

I still don't know what I'm going to do with my assets over here in NZ. It sounds easier to just sell my house and send the money over to buy a house in the US. Shame I cannot just wind up my Kiwisaver and do the same.