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Income Tax Act 2007

Timing and quantifying rules - Controlled foreign company and foreign investment fund rules - Cases of entry into and exit from FIF rules

EX 64: Migration of persons holding FIF interests

You could also call this:

“Rules for foreign investments when your New Zealand residency changes”

When you stop living in New Zealand, some special rules apply if you own investments in foreign companies. If you’ve been using certain methods to calculate your income from these investments, you’re treated as if you sold them just before you left. The price is set at what they were worth at that time. You’re then considered not to own them while you’re away, unless you come back and some other rules apply.

If you’re not a New Zealand resident or you’re a temporary resident, and you become a permanent New Zealand resident, there are also rules that apply. If you own foreign investments when this happens and you use certain methods to work out your income from them, you’re treated as if you bought them just after you became a resident. Again, the price is set at what they were worth at that time.

There are also rules for when you change between being a New Zealand resident, a non-resident, or a temporary resident. If you own foreign investments when this happens and you use a specific method to calculate your income from them, you need to look at section EX 16 to figure out how much income or loss to report.

These rules are designed to make sure your foreign investment income is taxed fairly as your residency status changes.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1515708.

Topics:
Money and consumer rights > Taxes
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EX 63: Consequences of changes in method, or

“What happens when you change how you calculate your foreign investment income”

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EX 65: Changes in application of FIF exemptions, or

“Rules for reporting changes in overseas investments”

Part E Timing and quantifying rules
Controlled foreign company and foreign investment fund rules: Cases of entry into and exit from FIF rules

EX 64Migration of persons holding FIF interests

  1. Subsection (2) applies if a person—

  2. ceases to be resident in New Zealand; and
    1. holds an attributing interest in a FIF at the time; and
      1. for the period before the change of residence, calculates FIF income or loss from the interest using—
        1. the comparative value method:
          1. the deemed rate of return method:
            1. the fair dividend rate method:
              1. the cost method.

              2. The person is treated as—

              3. having disposed of the interest immediately before the change of residence for an amount equal to its market value at the time; and
                1. not holding the interest when not resident in New Zealand, unless they become resident again and subsections (3) and (4) apply.

                  1. Subsection (4) applies if a person—

                  2. is a non-resident or a transitional resident; and
                    1. becomes a New Zealand resident who is not a transitional resident; and
                      1. holds an attributing interest in a FIF at the time; and
                        1. for the period after the change of residence or status, calculates FIF income or loss from the interest using—
                          1. the comparative value method:
                            1. the deemed rate of return method:
                              1. the fair dividend rate method:
                                1. the cost method.

                                2. The person is treated as—

                                3. having acquired the interest immediately after the change of residence or status for an amount equal to its market value at the time; and
                                  1. not holding it when the person is a transitional resident or not a New Zealand resident, unless they had previously ceased being resident and subsections (1) and (2) applied.

                                    1. Subsection (6) applies if a person—

                                    2. ceases to be—
                                      1. a New Zealand resident who is not a transitional resident, and becomes a non-resident:
                                        1. a non-resident, and becomes a New Zealand resident who is not a transitional resident:
                                          1. a transitional resident, and becomes a New Zealand resident who is not a transitional resident; and
                                          2. holds an attributing interest in a FIF at the time; and
                                            1. for the accounting period in which the change occurs, uses the attributable FIF income method to calculate FIF income or loss from the interest.

                                              1. The income interest rule in section EX 16 is relevant to the calculation of the amount of FIF income or loss for the period.

                                              Compare
                                              Notes
                                              • Section EX 64(2) heading: amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on , by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                                              • Section EX 64(2)(a): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on , by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                                              • Section EX 64(4) heading: amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on , by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                                              • Section EX 64(4)(a): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on , by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                                              • Section EX 64(5)(c): replaced (with effect on 1 July 2011 and applying for income years beginning on or after that date), on , by section 43(1) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                                              • Section EX 64 list of defined terms accounting profits method: repealed (with effect on 1 July 2011), on , by section 43(2)(a) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                                              • Section EX 64 list of defined terms attributable FIF income method: inserted (with effect on 1 July 2011), on , by section 43(2)(b) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                                              • Section EX 64 list of defined terms branch equivalent method: repealed (with effect on 1 July 2011), on , by section 43(2)(a) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).