FIF Investments (Foreign Investment Fund) - Tax Disclosure and Exemptions

New Zealand has complex laws relating to taxation of income and capital in relation to investments based in foreign jurisdictions that are held by NZ residents with the exception of the following countries.

In general, investments based in Australia, United Kingdom, Canada, Norway, United States, Germany and Japan have a special (concessionary) status in NZ tax laws because of the similarity of their tax systems to that of New Zealand.

For investments based in other, generally low tax jurisdictions, NZ investors are required to disclose and pay tax on both income and capital gains - whether realised or not. The rules are complicated and compliance may be expensive for most personal investors. Accordingly, investment in entities that are based in such countries (other than Australia, United Kingdom, Canada, Norway, United States, Germany and Japan) is generally eschewed - with the following exception.

Natural persons' - investors who are not companies or investing in their capacity as trustees - have a personal exemption from disclosing to IRD investments in Foreign Investment Funds. (Known as the 'de minimis' exemption). The level of exemption is currently $50,000 based on the aggregate, acquisition costs (initial investment value) of all FIFs held. This exemption absolves many investors from the burden of some onerous tax accounting requirements and paying tax on capital gains from investments in FIFs.

This exemption does not extend to companies and trustee investments (eg. family trusts) and accordingly there is no relief where FIF investments are held - however small.