Case Study: Undeclared Overseas Income and FIF

A client recently approached Ysquared Chartered Accountants after receiving a letter from Inland Revenue regarding overseas income that had not been correctly declared in New Zealand. The matter also involved overseas investments and New Zealand’s Foreign Investment Fund (FIF) rules.

The Situation

IRD had identified overseas income that was not reflected correctly in the client’s previous New Zealand tax returns. The client also held overseas investments, which meant the FIF rules needed to be considered as part of the overall tax position. After receiving the IRD letter, the client engaged Ysquared Chartered Accountants to assist with the matter.

The Outcome

We assisted the client with addressing the undeclared overseas income, the relevant FIF issues and the related Voluntary Disclosure. The final result was:

No penalty was imposed.

The client was required to recognise certain previously undeclared income and pay the resulting additional tax. The matter was ultimately resolved without an additional shortfall penalty.

Message from Ysquared

For New Zealand tax residents, overseas income may still need to be declared even if the money remains overseas. Overseas investments may also create separate tax obligations under the FIF rules. This case highlights the importance of reviewing your tax position if you:

• receive overseas income;

• hold foreign shares or funds;

• have never considered whether FIF applies; or

• receive a letter from IRD regarding overseas income.

If Inland Revenue has contacted you about undeclared overseas income or foreign investments, it is important to understand the full tax position before responding. Ysquared Chartered Accountants assists clients with overseas income tax, FIF, IRD reviews, Voluntary Disclosures and other complex tax matters.