There are a number of exemptions from the foreign investment fund (FIF) rules. Three of the more common ones are explained below.
De minimis exemption
Individual investors with attributing interests in FIFs that cost less than NZ$50,000 in total do not need to calculate income under the FIF rules.
Exemption for ASX-listed Australian companies
The ASX-listed Australian company exemption applies when you own shares in a company that:
- is included on the official ASX list
- is Australian resident and not treated as resident in another country under an agreement between Australia and that other country
- maintains a franking account, and
- offers stock that is not stapled.
Your dividend advice slip should show if your dividend is a franked dividend. This means the dividend has Australian franking credits attached. Note that Australian franking credits cannot be claimed as tax credits in New Zealand.
Check if an ASX-listed company qualifies for the exemption
We publish a list of companies that meet the ASX-listed Australian company share exemption criteria as soon as possible after the end of the tax year. Our list may not include every company that qualifies.
You do not need to use the Australian share exemption list, but if you do rely on it we consider this to be taking reasonable care in taking a tax position. If you use the list and have a shortfall because there was an error in the list, you will not be subject to any shortfall penalty for not taking reasonable care.
Foreign superannuation schemes
Since 1 April 2014, interests in foreign superannuation schemes have only been taxed under the FIF rules if they are a ‘FIF superannuation interest’. A FIF superannuation interest generally means an interest in a foreign superannuation scheme:
- that you acquired while you were resident in New Zealand, or were treated as a New Zealand tax resident under a double tax agreement, or
- where you complied with the FIF rules for an income year ending before 1 April 2014, returned that income in your income tax returns filed before 20 May 2013, and continue to return the income on that interest in succeeding years.
Tax treatment if an exemption applies
An interest in a foreign superannuation scheme that is not a ‘FIF superannuation interest’ will be taxed under a new set of rules. Under these rules, tax is payable when a lump sum or pension is received, or if the interest is transferred to a New Zealand or Australian superannuation scheme.
You need to return dividend income from your investment even if a FIF rules exemption applies. You may also need to return proceeds from disposal of your investment if the shares are held on revenue account.
International Tax Disclosure Exemption ITR30
The Commissioner issues an annual international tax disclosure exemption. The ‘International Tax Disclosure Exemption ITR30’ (or ‘2019 disclosure exemption’) applies for the tax year ended 31 March 2019.
Under this exemption residents do not need to disclose an interest of less than 10% in a foreign company if it is not an attributing interest in a FIF or if it falls within the $50,000 de minimis exemption. The de minimis exemption does not apply to anyone who has included FIF income or loss in their income tax return for the income year.
If the resident is not a widely-held entity, they do not need to disclose an attributing interest in a FIF that is an income interest of less than 10% if:
- the foreign entity is incorporated (in the case of a company) or otherwise tax resident in a treaty country or territory, and
- the fair dividend rate or comparative value method of calculation is used.
If the resident is a widely-held entity, they do not need to disclose an attributing interest in a FIF if:
- this is an income interest of less than 10%, and
- the fair dividend rate or comparative value method is used for the interest.
The resident is instead required to disclose the end-of-year market value of these investments. These must be split by the jurisdiction in which the attributing interest is held or listed.
The disclosure exemption also removes the requirement for a non-resident or transitional resident to disclose FIF interests.