NZ Foreign Investment Fund rules
If you invest in overseas shares or overseas equities, you could be taxed on the unrealised gain under the Foreign Investment Fund rules (FIF).
For example, if you had shares in Microsoft and they were valued at $100,000 on 1 April 2024 and then $200,000 on 31 March 2025 you could be taxed on the gain.
There are two options for calculating the gain:
- 5% of the opening value:
- In the example above it would be 5% of $100,000. So, you would have $5,000 taxable income. This is known as the Fair Divided Rate method or FDR method.
- The actual amount of the gain:
- In the example above this would be $200,000 - $100,000. So, you would have $100,000 as taxable income. This is known as the Comparative Method or CV method.
You can choose whichever is lower, although the IRD requires that some investments use the CV method only.
Losses cannot be claimed.
There are some exemptions. Among these are:
- 10% or more shareholding in a foreign company
- If you are an individual investor and the costs of the FIFs in total are less than $50,000. Please note this does not apply to Trusts or Companies.
- Shares in Australian listed companies
Foreign Currency
If an individual has a foreign bank account, term deposit or holds foreign currency, any unrealised exchange gains could be taxable under the financial arrangement rules.
It can depend on the amount and the other investments the taxpayer has.
It is important to advise us if you have any of these investments. Each year we also send an electronic questionnaire before we prepare your tax return, so it enables you to disclose these.
Make sure you stay on top of your overseas investments and how they might affect your taxes under New Zealand's Foreign Investment Fund (FIF) rules. Whether you're holding overseas shares or foreign currency, knowing how these rules apply can make a big difference. Our team can help you navigate the calculations and exemptions so you can choose the method that works best for you.
Contact Alliotts in Auckland to discuss your options and ensure you're prepared for the next tax year!
