New Zealand: Overview of taxation of interests in foreign investment funds
New Zealand rules present a risk of double taxation because they differ from the way tax rules generally operate in the rest of the world
New Zealand rules present a risk of double taxation
New Zealand taxpayers owning interests in foreign investment funds (FIFs) or foreign stocks, whose total portfolio of foreign interests (excluding certain listed Australian stocks) has a cost exceeding NZ$50,000, are subject to a 5% annual tax on the increase in value of such interests that must be paid on a provisional (estimated) basis three times during the year.
KPMG observation
With the fall in the New Zealand dollar against several major foreign currencies in the tax year to 31 March 2024, gains on foreign investments may be more pronounced this year.
The idea of taxing a notional 5% “fair dividend” from these investments also raises a number of practical issues, particularly when companies are unlisted (making valuations difficult) or when there is no cash flow to pay the tax on deemed income.
The New Zealand rules also present a risk of double taxation because they differ from the way tax rules generally operate in the rest of the world.
Read an April 2024 report prepared by the KPMG member firm in New Zealand
The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 3712, 1801 K Street NW, Washington, DC 20006.