Invoicing overseas clients

Overseas clients are one of the best ways to grow a contracting business, and they raise two recurring tax questions: what happens to GST, and what happens to the money. The GST answer is simple 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, such as the contract, the client's address, and correspondence. The 0% rate rests on those facts, and you may one day need to show them.

Income tax: nothing changes

As a New Zealand tax resident you pay income tax on your worldwide income, so overseas earnings go in your return exactly like local ones, with the same brackets, the same provisional tax, and the same set-aside habit. The one thing to watch is currency. Your return is in New Zealand dollars, so record the NZD value of each foreign-currency payment when it arrives, and there's nothing extra to reconstruct at year end.

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 to stop the same income being taxed twice. It's much easier to sort this out before the first invoice than to reclaim withheld money afterwards.

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 helps the negotiation but leaves the fluctuation with you.
• Watch the conversion spread. International bank transfers add a margin to the exchange rate, and on regular five-figure invoices that margin adds up to real money. Compare the total cost of your options, including dedicated multi-currency transfer services, before you settle on how you get paid.
• 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 handles this mix. Local invoices carry 15%, overseas invoices go out without it, and the GST ringfence only adds up on the invoices that actually collected GST. Income tax ringfencing works the same no matter where the client lives. Every paid invoice feeds your projected effective rate, which is how the IR3 will see it too.