ASX ETF - like S&P500 = NO FIF ?

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Originally Posted by SBQ

From what I recall, switching on years between FIF & CV does not apply to managed funds like PIE but rather, is only allowed for private individuals. As long as the funds that hold the equities can determine a fair market value (ie. any share on the stock exchange), then the FDR must be used....


....Again, it would be great if someone in industry can directly clarify what i've said. It's too easy to make assumptions instead of finding the facts. If the references i've made are out of date, then I stand corrected.

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It is clear that most of what you think you understand and continually criticize about the NZ tax regime is incorrect.
We are not going to get anywhere educating you until you clear your mind and then start again from the ground up.

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Originally Posted by SBQ

Yes a NZ company that does NOT trade on the NZX. If it were a dual listed company, then it would give the option for NZ investors to buy Xero on the NZX and benefit from tax free capital gains? Correct me if i'm mistaken.

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Originally Posted by Snow Leopard

The IRD website explains that XRO does not come under FIF at all because it is a NZ company.

You treat it the same as, for example, Mainfreight or Turners.

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Which part did you not understand?

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Originally Posted by 777

SBQ I look at it as an individual investing off shore. You appear to be creating a fund or some such thing, way out my area.

As far as my treatment of my investment in Platinum Funds units the following cut and paste from the IRD site explains it.

This calculator is for New Zealand tax residents who have investments in foreign companies with a purchase price of more than NZ$50,000 or who choose to use the FDR method under the FIF rules

Your direct income share in the FIF must be less than 10% at all times in the income year if the investment is not in a grey list country, and at any time if it is in a grey list country.

You can calculate your taxable income in four different ways:
Use the combined FDR and CV calculator to compare and choose the lesser liability
Use only the FDR method to calculate your taxable income
Use only the CV method for your guarantee return investments
Use the cost method if you don’t know the market value of your investment, but have an independent valuation

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I'm not speaking from the individual that invests DIRECTLY as you are correct in the options of choice in FIF for individuals. I'm referring to all those managed funds, Kiwi Saver Funds, PIEs, you name it, where individuals send their contributions into these funds and the managers take your contributions, added them with the many other contributions from other investors, and then go buy and sell shares in their fund / portfolio. These holdings if purchasing say US equities will fall under FIF by the fund manager's liability. Furthermore, i've read (can't find the link) but such $50K FIF exemption no longer applies to each individual client that invests into such fund (well how can that be tracked and computed?). Again correct me if i'm wrong but all the info we read on IRD under FIF applies to the individual that has direct ownership of the assets. Am I missing something here?

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Originally Posted by Snow Leopard

It is clear that most of what you think you understand and continually criticize about the NZ tax regime is incorrect.
We are not going to get anywhere educating you until you clear your mind and then start again from the ground up.





Which part did you not understand?

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If you find what i've said, and all the references I made online is inaccurate, then by all means, show it. At least bring it to the table instead of spewing your arrogance.

There are many articles online about the problems of NZ's FIF and IRD's treatment of foreign pensions for those looking to reside in NZ. Why? the complexities? If my findings are incorrect, then please elaborate on how the following articles are incorrect about NZ's grossly messed up taxing scheme:

https://www.interest.co.nz/personal-...unds-and-finds

"The principal issues which were unclear were whether foreign superannuation schemes were subject to the Foreign Investment Fund (FIF) regime, and what was the tax treatment on transfer?
“Probably”, and “Not sure” in case you’ve forgotten. "

and it seems like the media has got a wind of the reporter's claim:

https://www.stuff.co.nz/business/money/78361237/migrants-say-they-are-being-handed-tax-bills-they-cannot-pay


And over in the UK - it seems they've got a bit of wind on the same issue:

https://uk-pension-transfer.co.nz/ta...superannuation

As for XRO vs Mainfreight or Turners. The latter 2 trade on the NZX and therefore the NZ resident investor gets the benefit of tax free capital gain + dividend imputation credits (if any) on divs (likewise for the Kiwi Saver funds that buy those 2 companies on the NZX). For Xero, the excuse is they pay no dividends, and therefore is NOT exempted from FIF. Meaning the NZ resident owning XRO on the ASX has to pay FIF tax (and again, i'm speaking from a cost basis of well over $50K as it seems that threshold keeps coming up in discussions). All 3 of these companies are based in NZ. Is it a requirement that companies must pay dividends before NZ shareholders can get the benefit of being FIF exempted? That's what I don't understand. Again, correct me if i'm wrong.

SPG
Yes you are right in your last sentence about it being about individuals.

If you invest in any of those Funds then there is no more tax to concern you as the funds handle it all and being PIE income does not need any attention.Those funds send you an annual tax statement which you simply file in your trash. That info appears in your myIR with the IRD simply for them to ensure you are using the correct PIR. With regard to the $50,000 it would not apply to these investments because it would not be necessary however if you want to invest direct in an offshore based fund or foreign shares as well then I am sure you must be able to use it. If not then every Kiwisaver member could not which would rule out a lot of people using it and then the exemption would have little purpose.

I have investments in PIE Funds (Mike Taylor) and Kiwisaver, but if I was to invest direct offshore again then I wouldn't hesitate to apply the $50,000 if I needed it.

I do think it would be worth your while to find a specialist on FIF and take your personal situation to them. It would cost you an hour of their time but would be beneficial.

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Originally Posted by 777

SPG
Yes you are right in your last sentence about it being about individuals.

If you invest in any of those Funds then there is no more tax to concern you as the funds handle it all and being PIE income does not need any attention.Those funds send you an annual tax statement which you simply file in your trash. That info appears in your myIR with the IRD simply for them to ensure you are using the correct PIR. With regard to the $50,000 it would not apply to these investments because it would not be necessary however if you want to invest direct in an offshore based fund or foreign shares as well then I am sure you must be able to use it. If not then every Kiwisaver member could not which would rule out a lot of people using it and then the exemption would have little purpose.

I have investments in PIE Funds (Mike Taylor) and Kiwisaver, but if I was to invest direct offshore again then I wouldn't hesitate to apply the $50,000 if I needed it.

I do think it would be worth your while to find a specialist on FIF and take your personal situation to them. It would cost you an hour of their time but would be beneficial.

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Thanks for clarifying. I agree without a doubt, the individual gets a better tax treatment under FIF than if it was a ie PIE Fund which has to use FDR year after year (no switching to CV on years of paper loss). I remember some years ago the managed fund industry crying out because of online discount brokers like Sharesies and Hatch taking away their clients. I think for the vast majority, that $50K cost basis exemption makes things attractive.

It's great to be informed through the forum but as you say, best to seek financial advise. Well I did but none of the financial advisors could give me tax advice and said I should see a tax accountant instead. When time comes nearer, then I will but I will only go to the big larger accounting firms like KPMG, Delloite etc. as they have a much larger tax library and will put it to them straight in comparison to say if one moves overseas etc. Cheers!

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Originally Posted by SBQ

As for XRO vs Mainfreight or Turners. The latter 2 trade on the NZX and therefore the NZ resident investor gets the benefit of tax free capital gain + dividend imputation credits (if any) on divs (likewise for the Kiwi Saver funds that buy those 2 companies on the NZX). For Xero, the excuse is they pay no dividends, and therefore is NOT exempted from FIF. Meaning the NZ resident owning XRO on the ASX has to pay FIF tax (and again, i'm speaking from a cost basis of well over $50K as it seems that threshold keeps coming up in discussions). All 3 of these companies are based in NZ. Is it a requirement that companies must pay dividends before NZ shareholders can get the benefit of being FIF exempted? That's what I don't understand. Again, correct me if i'm wrong.

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I think SL is saying that its not considered foreign and therefore doesn't need an exemption. While it IS listed on the ASX it is a NZ company so the answer on this forum is simple but you seem to be overcomplicating it.

https://app.companiesoffice.govt.nz/...panies/1830488

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Originally Posted by peat

I think SL is saying that its not considered foreign and therefore doesn't need an exemption. While it IS listed on the ASX it is a NZ company so the answer on this forum is simple but you seem to be overcomplicating it.

https://app.companiesoffice.govt.nz/...panies/1830488

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I get that - and no one is disagreeing that Xero is not a NZ company, this is very obvious.

What is not obvious is, why should a NZ company be subjected to FIF - just because they trade on an overseas stock exchange? It's not a complicated question and it may be simply that NZ has very skewed tax laws just like the difference between owning multiple houses vs owning foreign shares under FIF. We can turn the tables around and question why foreign companies listed on NZX get the benefit of being FIF exempt for NZ shareholders?

I'm not trying to pick battles here and i'm not being ignorant. I've spoken to local financial advisors around FIF and not surprisingly, they don't give me a clear distinct answer because taxation is not part of the CFP role in NZ (but they are mandatory knowledge for CFP in Canada and in the US). All the questions I see answered in Canadian 'money guide online advice blah blah blogs' start from the angle of taxation when it comes to investments in retirement planning (and it covers all different asset classes). I mean something so critical to the overall end disposable income to the investor and yet taxation is not clearly spelled out in NZ. It is complicated (well complicated enough that IRD themselves don't appear to know what they're doing for those bringing their pension over from the UK to NZ: ref my online link above).

Perhaps the biggest con I see is one should not have to pay $300/hour for a tax accountant, just to find out why some NZ companies (like XRO) attract FIF while some others don't.

Statement of Fact:

XRO, a NZ company listed on the ASX, is not subject to the FIF rules.

What am I missing here from IRD's FIF Exemption Checker:

https://www.ird.govt.nz/income-tax/i...ent-fund-rules

The wording for BHP:

The ASX Ticker Code you have entered relates to BHP Group Ltd.
Based on the information you have provided, the income from the shares qualifies for the Australian share exemption provided the shares were held at 1 April 2020 or were acquired on the market during the year.
This means income from the shares is taxed under the general income tax rules, the same as investments in New Zealand. They are not attributing interests for tax purposes and therefore fall outside the FIF rules.




The wording for XRO:

Result: XRO

The ASX Ticker Code you have entered relates to Xero Ltd. Based on the information you have provided, your income for 1 April 2020 to 31 March 2021 does not qualify for the Australian share exemption. This is because Xero Ltd is a New Zealand company and not a FIF. Income from the shares is taxed under the general income tax rules.

Clarify?

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Originally Posted by SBQ

The wording for XRO:

Result: XRO

The ASX Ticker Code you have entered relates to Xero Ltd. Based on the information you have provided, your income for 1 April 2020 to 31 March 2021 does not qualify for the Australian share exemption. This is because Xero Ltd is a New Zealand company and not a FIF. Income from the shares is taxed under the general income tax rules.

Clarify?

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I believe , but dont know for absolute sure that it is exactly what has been said

it doesnt qualify for an exemption - because it doesnt need to. because it is not foreign.

thats how I read it.

who is missing the point here ? I dont think its me but could be ?

Also for IVV as mentioned above. . .

Result: SPY
The ASX Ticker Code you have entered relates to SPDR S&P 500 ETF Trust.

Based on the information you have provided, your income for 1 April 2020 to 31 March 2021 does not qualify for the Australian share exemption.

Other exemptions apply to certain ASX listed investments under certain circumstances. Please consult your accountant, tax advisor, broker, or the relevant investment fund.

If the investment is a FIF, the income will generally be taxed under the:

fair dividend rate (FDR) method
comparative value (CV) method
cost method (CM)
deemed rate of return (DRR)
You can find information about these methods on our website under Foreign investment funds

Xero does not qualify for the Australian exemption because as a New Zealand company it does not come under the FIF rules to start with, regardless of where or where not it is listed.

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Originally Posted by Nor

Xero does not qualify for the Australian exemption because as a New Zealand company it does not come under the FIF rules to start with, regardless of where or where not it is listed.

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More clarity needs to be given on IRD's website, specifically the exact wording what is FIF and what is not FIF and what is exempt from FIF (if they're foreign based or not?)

If Xero re-established a new head quarters in Australia (ie how Burger King moved to Canada in the merger with Tim Hortin's Donuts), where would Xero fit in under FIF? One can't simply assume that if a company started out in NZ, and leaves ; where is the disclosure of this when a person looks at the IRD's FIF checker online to find it's status?

Likewise if a foreign company chooses to establish a head quarters in NZ (ie. Restaurant Brands that holds NZ based fast foods such as KFC, Pizza Hut, Carl Jr) - these are clearly foreign brands but since they trade on the NZX, they are simply exempt from FIF.

This is the kind of information that NZ financial advisors don't know and don't care to advise their clients. What % of the profits are gone abroad for say KFC despite they are FIF exempted as having a separate parent entity established in NZ. The complexities involved are mind boggling. If was is in Canada, my choice of buying a company on the TSX vs NYSE is very clear. We look at the corporate tax rates, and state / prov tax rates and that's pretty much about it. The individual investor pays CGT regardless if the shares were owned on the TSX or on the NYSE. (many Canadian companies enjoy dual listing Can / US).

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Originally Posted by SBQ

More clarity needs to be given on IRD's website, specifically the exact wording what is FIF and what is not FIF and what is exempt from FIF (if they're foreign based or not?)

If Xero re-established a new head quarters in Australia (ie how Burger King moved to Canada in the merger with Tim Hortin's Donuts), where would Xero fit in under FIF? One can't simply assume that if a company started out in NZ, and leaves ; where is the disclosure of this when a person looks at the IRD's FIF checker online to find it's status?

Likewise if a foreign company chooses to establish a head quarters in NZ (ie. Restaurant Brands that holds NZ based fast foods such as KFC, Pizza Hut, Carl Jr) - these are clearly foreign brands but since they trade on the NZX, they are simply exempt from FIF.

This is the kind of information that NZ financial advisors don't know and don't care to advise their clients. What % of the profits are gone abroad for say KFC despite they are FIF exempted as having a separate parent entity established in NZ. The complexities involved are mind boggling. If was is in Canada, my choice of buying a company on the TSX vs NYSE is very clear. We look at the corporate tax rates, and state / prov tax rates and that's pretty much about it. The individual investor pays CGT regardless if the shares were owned on the TSX or on the NYSE. (many Canadian companies enjoy dual listing Can / US).

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If a Canadian person chooses to establish them-self in New Zealand should he learn to live with the local tax system instead of whining continuously about how it is better in some frigid snow bound foreign la-la-land where all is dried moose meat & maple syrup?

https://curiocity.com/wp-content/upl...er-weather.jpg

8 wild facts about Canadian winter that you might not know

[ with the usual apologies to my Canadian friends ]

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Originally Posted by SBQ

More clarity needs to be given on IRD's website, specifically the exact wording what is FIF and what is not FIF and what is exempt from FIF (if they're foreign based or not?)

Likewise if a foreign company chooses to establish a head quarters in NZ (ie. Restaurant Brands that holds NZ based fast foods such as KFC, Pizza Hut, Carl Jr) - these are clearly foreign brands but since they trade on the NZX, they are simply exempt from FIF.

This is the kind of information that NZ financial advisors don't know and don't care to advise their clients. What % of the profits are gone abroad for say KFC despite they are FIF exempted as having a separate parent entity established in NZ. The complexities involved are mind boggling.

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Short Answer

RBD is an NZ company, and so is exempt from FIF for shareholders.


Long Answer

Restaurant Brands (RBD) operates -under licence- KFC, Pizza Hutt, and Taco Bell restaurants around the Pacific rim. RBD was floated on the NZX late last century by U.S headquartered Pepsico, who, at that time, owned what was to eventually become the separate listed entity 'YUM Brands!' (YUM). At the time of the RBD float, Pepsico reduced their holding in RBD to zero. RBD was not and never has been a 'headquarters' for any American entity. RBD may have been floated originally by the Americans. But it has been an NZ company from day 1.

The restaurant concepts you talk about are owned by master franchise holder 'YUM Brands!', which is a US registered company (except for Carls Junior which is franchised from another U,S corporation) . RBD has only ever owned the restaurants, or leases to the restaurants. RBD have never owned the brands KFC., Pizza Hut and Taco Bell, under which monikers the restaurants trade. YUM only owns a few restaurants themselves. In the case of KFC, 99% globally are franchised.

YUM generally earns money by taking a percentage of the turnover of those KFC/ Pizza Hut / Taco Bell restaurant owners from around the globe that have licensed their restaurant concepts. RBD is a bit shy as to what the franchise fee they pay to YUM each year is (I think they have a confidentiality agreement that may mean they cannot disclose it). But disclosure from similarly listed restaurant owning companies that operate the KFC, Pizza Hut and Taco Bell concepts overseas would suggest the franchise fee is around 5% of turnover. That isn't straight profit for YUM. YUM provide marketing support, product development, training manuals and, in the case of KFC, shipments of the top secret 11 herbs and spices that give KFC its globally repeatable flavour. The franchise fees are are part of the 'Cost of goods sold' that is not broken down in the RBD financial statements. But if my estimate of a franchise fee of 5% of sales is correct:

0.05 x $892.359m = $42.6m

The franchise fees are roughly equivalent to the normalised profit that RBD made last year, so are very substantial.

The fact that Mexican owned 'Global Valar S.L.' now own 75% of RBD makes RBD a foreign controlled New Zealand company. But it doesn't change the fact that RBD is a New Zealand company, even though 75% of profits now go off shore. So you see, once you know the background story as to how RBD works, the tax situation becomes clear. I sincerely hope your mind is now 'unboggled' on RBD, SBQ.

SNOOPY

discl: I know all this because I am a foundation RBD shareholder, I still own shares in both RBD and YUM, and I make my FIF declaration relating to my ownership of YUM annually