International Tax & FIF
Offering expert advice to help you comply with NZ's international tax regulations
Expert Assistance with International Tax in NZ
Navigating the complexities of international tax regulations is crucial for New Zealand tax residents with global income. At Ysquared Chartered Accountants, we specialise in managing the tax obligations associated with foreign investments, ensuring compliance and optimising your tax position.
Understanding Your Tax Obligations
As a New Zealand tax resident, your worldwide income is subject to New Zealand tax laws. This includes income from foreign investments, which may fall under specific regimes such as the Controlled Foreign Company (CFC) regime and the Foreign Investment Fund (FIF) regime.
Both regimes have distinct rules and implications for taxable income derived from foreign sources.
Controlled Foreign Company (CFC) Regime
The CFC regime applies to New Zealand residents with shares in a foreign company.
If you hold a significant ownership interest in a controlled foreign company, you may be subject to taxation on the income generated by that company.
The extent of this taxation depends on various factors, including the nature of the income (active vs. passive) and the level of control you exert over the company.
Foreign Investment Fund (FIF) Regime
The FIF regime applies to New Zealand residents with interests in foreign entities, including:
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Foreign shareholdings
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Foreign superannuation schemes
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Foreign life insurance policies
Depending on the specifics of your foreign investments, you may be required to report income from these sources. However, there are exemptions and specific rules that may apply, potentially reducing your tax obligations.
Tax Implications of Your Foreign Investments
To determine the tax implications of your foreign investments, several critical factors must be evaluated:
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Residence of the Investor
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Residence of the Investment Entity
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Application of International Tax Rules
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Foreign Tax Credits
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Double Tax Treaty
Exceptions to the CFC and FIF Regimes
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There are exceptions to the CFC and FIF regimes that may apply to your situation:
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Active Income Exception: Under the CFC regime, if a controlled foreign company primarily earns active income, it may not need to attribute income to New Zealand shareholders.
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Thresholds and Exemptions: The FIF regime includes specific thresholds and exemptions that could apply based on your investment amounts and types.