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Guide to Foreign Investment Funds and Fair Dividend Rate (IR 461)

This guide explains the tax rules relating to foreign investment funds (FIFs). Investors who have certain types of offshore investments may have FIF income.

The FIF tax rules that were introduced for the years beginning on or after 1 April 2007 aimed to encourage savings by low and middle income earners and to remove inconsistencies in the old rules which:

  • overtaxed some investors using New Zealand-based managed funds;
  • were biased in favour of direct investment in offshore shares; and
  • favoured investment in certain countries over others.

You can find more information about foreign share investments here.

IRD Voluntary Disclosure Helo

A FIF includes the following:

  • a foreign company;
  • a foreign unit trust;
  • a foreign superannuation scheme (prior to 1 April 2014);
  • a FIF superannuation interest (from 1 April 2014); and
  • an insurer under a life insurance policy (and the policy is not offered or entered into in New Zealand).

Note there are potentially different rules for shareholding in foreign companies of 10% or more.
There are various exemptions for FIF, which makes the FIF rules more complex. If a taxpayer does not need to apply the FIF rules for its foreign investment, the dividend shall be returned on cash basis.

Foreign tax credits (if any) shall be claimed in respect to the foreign dividend/FIF income. The relevant double tax agreement shall also be considered.

Guide to Foreign Investment Funds and Fair Dividend Rate IR461

IR 461

Please note the guide(s)/form(s) were the latest version at the time this web page was finalised. If you need the latest form/guide, please visit IRD’s website at here.

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