Invoicing overseas clients

Overseas clients are one of contracting's best expansions and the source of two recurring tax questions: what happens to GST, and what happens to the money. The GST answer is pleasantly clean for most service contractors; the money answer is mostly practicalities worth setting up once. This guide covers both.

GST: zero-rated, not exempt

Services supplied to a non-resident who is outside New Zealand when the service is performed are zero-rated: you charge GST at 0%. A Wellington developer building software for a Sydney company, or a designer delivering work to a US startup, invoices without adding 15%.

The distinction that matters: zero-rated is not the same as exempt. The supply is still inside the GST system, which means:

• The income still counts toward the $60,000 registration threshold.An unregistered contractor billing $80,000 to overseas clients still has to register; they'll just zero-rate those supplies once they do.
• You still claim GST on your business purchases. A contractor working solely for overseas clients typically collects no GST but keeps claiming input credits, and GST returns become regular small refunds.
• The supplies still go on your GST return, in the zero-rated box, each period.

Keep evidence that the client is genuinely overseas: the contract, the client's address, correspondence. The 0% rate rests on facts you may one day need to show.

Income tax: nothing changes

As a New Zealand tax resident you pay income tax on your worldwide income, so overseas earnings land in your return exactly like local ones: same brackets, same provisional tax, same set-aside habit. The one wrinkle is currency: your return is in New Zealand dollars, so record the NZD value of each foreign-currency payment when it arrives and the year end takes care of itself.

If a client's country wants to withhold tax on payments to you, ask them early what residency paperwork prevents it; most jurisdictions have a standard form for foreign contractors, and New Zealand's tax treaties exist precisely to stop double taxation. Sorting this before the first invoice beats reclaiming withheld money after.

The money practicalities

• Agree the currency in the contract, along with who carries the transfer fees. Billing in NZD moves exchange risk to the client; billing in their currency usually wins the negotiation but leaves the fluctuation with you.
• Mind the conversion spread. Bank international transfers price the exchange rate in their favour; on regular five-figure invoices the spread is real money, and the multi-currency transfer services generally beat banks on it.
• Invoice like you would at home. The same information requirements apply, with no GST line (or an explicit 0%) for the zero-rated supply, and payment instructions that actually work internationally.

How Coffer helps

Coffer's per-invoice GST toggle is built for exactly this mix: local invoices carry 15%, overseas invoices go out without it, and the dashboard's GST ringfence only accumulates on the invoices that actually collected GST. Income tax ringfencing doesn't care where the client lives; every paid invoice feeds your projected effective rate the same way, which is exactly how the IR3 will see it.