Update on Changes to FIF Rules

Yesterday the Minister of Revenue, the Honourable Simon Watts, announced that the FIF changes which have been previously released for consultation will be made in the next tax bill which is expected to be introduced to Parliament in approximately August 2025, with retrospective application for people who become New Zealand tax resident on or after 1 April 2024. 

As we have written about previously in this article, the FIF rules are a pain point for many migrant clients, and particularly US clients, due to the non-compatibility of the New Zealand and US tax system. The FIF rules apply to investments in overseas companies (amongst other things), and can impose an annual tax based on five percent of the value of the shares at the start of the income year. This can be viewed by many as a form of wealth tax. This method was introduced to incentivise New Zealanders to invest in New Zealand.

This form of tax is generally not compatible with foreign tax systems, which will tax based on dividends and realised gains. The issue is further exasperated for taxpayers who are required to continue paying tax in another country, and there is generally no foreign tax credit that can be applied for the tax paid in New Zealand due to the differences in the way the taxes are imposed. 

In order to assist migrants and returning kiwis, a proposal was released last year for consultation.  While there are very limited details available at this stage, the Minister of Revenue’s comments yesterday seemed to suggest that the consultation process has slightly expanded the application of the proposed changes.  This will be welcomed by the industry. However, there is still work to do, given that these rules will only apply to those who become New Zealand tax resident on or after 1 April 2024. 

We eagerly await the details of the proposed legislation when they are available, and welcome any changes to assist our migrant clients with their relocation to New Zealand.

This article is intended for informational purposes only and should not replace specific tax advice. For personalised advice on all tax issues please contact us.

This article was accurate at the time of publishing.