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Get help with International Tax in New Zealand

A New Zealand tax resident taxed on worldwide income may be subject to specialist regimes of their income from foreign sources. The resident’s investment in a controlled foreign company and a foreign investment fund may result in taxable income.

Controlled foreign company regime may tax New Zealand residents who have shares in a foreign company. Similarly, the foreign investment fund regime may also tax New Zealand residents with foreign shareholdings, interests in foreign superannuation schemes and life insurance policies. If there is an overlap between the controlled foreign company and foreign investment fund regimes in respect of foreign shares, only one regime will apply depending on the level of ownership and other factors.

To find out whether there are any income tax implications for offshore investments or for income from overseas, the following criteria should be considered:

  • Residence of the investor;
  • Residence of the investment entity;
  • Application of the “international tax rules” of controlled foreign company and foreign investment fund;
  • Availability of foreign tax credits; and
  • Effect of double tax treaty.
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Overseas income and investment tax obligations

To determine whether the controlled foreign company or foreign investment fund rules apply for a foreign investment, certain criteria shall be considered.

There are several exceptions to the controlled foreign company and foreign investment fund rules. Here are some examples.

  • Under the controlled foreign company regime, where the controlled foreign company is deriving mainly active income, it may not be required to attribute income to its New Zealand shareholders.
  • Under the foreign investment fund regime, where the individual holds foreign stock costing more than NZD 50,000 it may not be required to calculate income from foreign share on accrual basis.
  • Controlled foreign company and foreign investment fund regimes do not apply to non-residents and transitional residents. Special rules apply to inbound and outbound taxpayers. Depending on the circumstances, planning opportunities may exist.

If you would like to know more about Controlled Foreign Company and Foreign Investment Funds, click here.

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