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 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