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  1. #1
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    Default Overseas shares - IRD's FIF

    Just been looking into this. I have downloaded the IRD's FIF document. I went thru the questionnaire and meeting one of the criteria of less than $50,000 in attributing interests I don't need FIF but I may have other tax obligations.

    1. So do I just do the normal IR3 for dividends, and what does one do with the tax that is deducted overseas? Is there is a IRD brochure to assist in this regard?

    2. If I had more than $50,000 in attributing interests which means I need to do FIF. With their main method - FDR. It takes 5% of the opening market value. The first year the opening value you obtain it is zero out. So if you first obtain $100,000 and it goes up to $155,000. Is $55,000 taxed at 5%? So capital is taxed? The document mentions FDR income but what about dividend income?

    3. FDR - Using their example it looks like the 5% is taken straight from the opening market value. What happens if the person's return is less than 5% but more than $50,000. I know there is the CV method which takes the closing market value and minus the opening market value.


    Many thanks.
    Last edited by rayonline; 15-06-2017 at 08:36 AM.

  2. #2
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    Hi ray

    Try these links



    http://www.sharetrader.co.nz/showthr...&highlight=FIF

    http://www.sharetrader.co.nz/showthr...&highlight=FIF


    http://www.sharetrader.co.nz/showthr...&highlight=FIF

    Other notes: The FIF applies to a single investment of $50K or more not a portfolio from my understanding, i.e. $30K in XYZ and $25K in ABC does not count
    Again, from my understanding, if you pay under either FIF method, you do not also have to declare the dividends received

    If not falling under the FIF rules, any dividends are declared as overseas income and if they have any "overseas" withholding tax deducted you can claim this but not any other tax paid, e.g.the franking credits in Aus. - cannot claim these like you can with NZ dividends, therefore you are taxed twice in effect - again my understanding of it.

  3. #3
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    Quote Originally Posted by Jay View Post
    Hi ray







    Other notes: The FIF applies to a single investment of $50K or more not a portfolio from my understanding, i.e. $30K in XYZ and $25K in ABC does not count
    .
    Actually I understood it was portfolio value of $50k or more. (ie very easy to be implicated)

    http://www.ird.govt.nz/toii/fif/how-...how-tax-rules/

  4. #4
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    Quote Originally Posted by Jay View Post
    Hi ray

    Try these links



    http://www.sharetrader.co.nz/showthr...&highlight=FIF

    http://www.sharetrader.co.nz/showthr...&highlight=FIF


    http://www.sharetrader.co.nz/showthr...&highlight=FIF

    Other notes: The FIF applies to a single investment of $50K or more not a portfolio from my understanding, i.e. $30K in XYZ and $25K in ABC does not count
    Again, from my understanding, if you pay under either FIF method, you do not also have to declare the dividends received

    If not falling under the FIF rules, any dividends are declared as overseas income and if they have any "overseas" withholding tax deducted you can claim this but not any other tax paid, e.g.the franking credits in Aus. - cannot claim these like you can with NZ dividends, therefore you are taxed twice in effect - again my understanding of it.

    I think you will find it is the total cost price of investments that make up the $50,000.

  5. #5
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    My memory appears to be suspect, thought I read somewhere in those post quite sometime ago that is was each investment,

    Wording from the IDR link you posted blackcap says : For income years starting on or after 1 July 2011 where your investment does not exceed $50,000 you can elect to use the FIF rules. But you must then use the FIF rules for 4 years.
    You could read that as any single investment

    But then elsewhere it says "the total of your overseas investments is more than NZ$50,000 or you wish to calculate your income using the FIF rules (see Note ..."

    So it is either total overseas income (interest, dividends etc) greater than $50K and/or total cost of your investment(s) at time of purchase is greater than $50K
    Hope that is right, mine have not so not worried!

  6. #6
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    I'm with Blackcap and 777
    Section CQ 5 When FIF income arises
    (d) if the person is a natural person and not acting as a trustee,—
    (i) the total cost, calculated under section EX*68 (Measurement of cost), of attributing interests in FIFs that the person holds at any time in the year when the person is a New Zealand resident is more than $50,000:



    I guess you need to work out what Foreign Investment Funds you hold. Wasn't there something about loosening up on entities listed on the ASX? not sure can't see an IR871-2017 list out yet. maybe this comes out after June which is the Aussie financial year end.

    If your married and investments are in joint names you need more than $100,000 invested in FIFs before the FIF rules apply.
    Last edited by Aaron; 15-06-2017 at 02:06 PM.

  7. #7
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    Quote Originally Posted by rayonline View Post
    Just been looking into this. I have downloaded the IRD's FIF document. I went thru the questionnaire and meeting one of the criteria of less than $50,000 in attributing interests I don't need FIF but I may have other tax obligations.

    1. So do I just do the normal IR3 for dividends, and what does one do with the tax that is deducted overseas? Is there is a IRD brochure to assist in this regard?
    My opinion is that you convert the dividend to NZ dollars and return the income. Withholding taxes deducted might depend on the double tax agreement with the country in question but generally convert to NZ dollars and include as overseas tax to ensure you are not taxed twice. Not sure if there is a brochure. Remember do not include Australian franking credits


    2. If I had more than $50,000 in attributing interests which means I need to do FIF. With their main method - FDR. It takes 5% of the opening market value. The first year the opening value you obtain it is zero out. So if you first obtain $100,000 and it goes up to $155,000. Is $55,000 taxed at 5%? So capital is taxed? The document mentions FDR income but what about dividend income?
    My understanding of FDR is that in the year of purchase there is no income to declare but in the second year in your example there is $7,750 income (155,000*5%). regarding dividends if you are using the FDR then actual dividends paid are not considered although you still can include foreign withholding tax
    3. FDR - Using their example it looks like the 5% is taken straight from the opening market value. What happens if the person's return is less than 5% but more than $50,000. I know there is the CV method which takes the closing market value and minus the opening market value.
    This question is a bit confusing for me but assuming you mean if actual dividends and capital gains are less than 5% is the Comparative Value(CV) method preferable? Logically it must be but you must use either the FDR or CV method across your entire FIF portfolio. You can not mix and match.


    Many thanks.
    I would disclaim that my understanding is limited and I will await any criticism or correction from the general public.
    Last edited by Aaron; 15-06-2017 at 03:42 PM. Reason: Australian franking credits

  8. #8
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    Actually I think they have just scrapped FIF tax.

  9. #9
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    Quote Originally Posted by BDL View Post
    Actually I think they have just scrapped FIF tax.
    Really? Where did you hear that?

    What we should do is vote The Opportunities Party in and with the equity tax coming in we could do away with the FIF regime altogether.

  10. #10
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    Quote Originally Posted by BDL View Post
    Actually I think they have just scrapped FIF tax.
    I hope not. It saves me a fortune.

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