tax on overseas shares nz

"This will be followed by further help, including a booklet and an online calculator which will calculate the answers investors can put in their tax returns from the data they input," says the department. The new rules don't apply to individuals whose non-Australasian overseas shares cost less than $50,000. Carrigan adds, "The $50,000 exemption does not generally apply to trusts and estates. A. Murray Brewer Partner, Tax D +64 9 922 1386 M +64 27 448 8880 E murray.brewer@nz.gt.com Greg Thompson Partner and National Director, Tax The rules apply when less than 10% of the shares in a foreign company are held, or units of less than 10% in an overseas unit trust. The foreign investment fund (FIF) taxation regime in New Zealand is broadly designed to prevent taxpayers from using investments in offshore entities to avoid or defer their tax obligations. "This compliance cost savings measure is intended to cater for situations where a person may no longer have records of the purchase price of shares acquired many years ago." Q. I have a portfolio of UK shares over the $50,000 threshold and therefore due to fall prey to the new foreign investment wealth tax. Under the new fair dividend rate method no tax would be payable in such an income year." Does this investment strategy make sense for the first year, or is it too good to be true? This means a New Zealand resident receiving an inheritance from an overseas estate is treated as receiving a distribution from a foreign trust. But it might be pretty hard to argue that you had any other purpose. This is then converted to a certain number of shares, which are added to the base shareholding. If one spouse dies and leaves their assets to the survivor, and that causes the survivor's portfolio to exceed the $50,000 limit, the surviving spouse will then be subject to the new rules. However, with the new system due to be implemented this year, what does one do? zero)? Will the IRD produce a booklet that could be used as a guide for those with overseas investments that clearly set out the rules of what can and cannot be done? The IR330C form is the IR form you need to complete to choose the rate of tax you have deducted from your payments. If, however, you have larger holdings or plan to grow your international holdings, it's probably better just to pay the tax. For example BHP Billiton and Rio Tinto are dual listed in Australia and Britain, but are they resident in Australia? A. February 10, 2007 Q. I refer to the recent reply regarding the new overseas tax legislation from Inland Revenue, which stated that the Aussie exemption doesn't include companies that are not resident in Australia, even if they are listed on the Australian stock exchange. beyond Australia, mean just shares or does it include assets like property, bonds and cash? "If the shares make a loss then no tax is payable," adds Frawley. There's some compensation, though. they are classified as traders by the IRD), Diversity Report – Shows how your portfolio is diversified across various groupings, at a chosen point in time, Benchmarking – enables you to select any ETF in the Sharesight database to compare against a holding or your overall portfolio, Contribution Analysis Report – Explains the drivers behind your portfolio’s performance, be they stock selection, asset allocation, or exposure to certain countries, sectors, or industries, 5 ways Sharesight helps NZ investors at tax time, How Sharesight calculates your investment performance. For example: A woman owns shares costing $40,000 and her husband owns shares costing $5000. Find out whether you need to pay UK tax on foreign income - residence and ‘non-dom’ status, tax returns, claiming relief if you’re taxed twice (including certificates of residence) shares in foreign companies (like what you buy on Hatch) rental properties in another country (not included in FIF rules) bank accounts (not included in FIF rules) If you’re a tax resident outside New … The woman's total would be $40,000 plus $15,000 (half of $30,000), which brings her over the threshold. Generally, I think the diversification gains of owning offshore shares outweigh the disadvantage of paying the tax. By compiling all your portfolio data in one place, Sharesight eliminates the paper-chase and headaches normally associated with performance and tax reporting. A. Alternatively, the couple could have jointly owned shares totalling up to $100,000. Only you can decide if the strategy is worth the hassle, costs and possibly sleepless nights. 2001 New Zealand Master Tax Guide, 26-185. Yes. 2) Is the $50,000 exemption or threshold based on the total cost of the shares including brokerage, or is it just the cost of the shares? Frawley says there are several websites that have foreign exchange calculators with historical data. All investors will see is lower returns. However, I am uncertain when the law will be passed by Parliament and what are the dates/financial years when these investments would be assessed under the new law. This is an annual tax on the rise in value of your holdings, not a tax on the sale. Q. Pre-register here! Individuals will pay tax, at their personal tax rate, on the lower of: Is it still April 1, 2007, i.e. the other country or territory has deducted tax. Tax for New Zealand tax residents. "On-line calculators will be available on Inland Revenue's website which will calculate the tax answers for investors from the data they input," says Frawley. This is your personal tax rate. Our Kids Accounts fees are just $0.50 to buy or sell up to 50 shares. But, says Peter Frawley of the department, "If a person receives a dividend from a company listed on the Australian stock exchange that carries Australian franking credits (this would be stated on the shareholder dividend statement that the person receives from the company) then this should provide sufficient certainty that the company is resident in Australia." "For those that have a buy and hold approach [i.e., they do not buy and sell shares in the same year] the new rules are relatively simple to apply." Your exemption lasts for up to 4 years and means you do not pay PIR on income that you get from foreign investments as long as: the income from them is made outside New Zealand In general, there are two methods in which you pay tax on your investments. Inland Revenue is being unfair, if it leaves it up to the taxpayer to determine a company's residency. We worked in Ireland for a number of years and received some shares as part of employee incentive schemes etc, ie. If you get interest and dividends from overseas, there are different rules depending on your situation. For some investments, New Zealanders are not allowed to use the FDR method. As a consequence of the new tax law coming into force I will be reducing the portfolio substantially. But a capital gains tax on those shares could see investors move towards more investment in overseas shares. A tax resident is taxed on worldwide income, with a tax credit allowed if taxes are paid overseas on foreign sourced income. New Zealand tax law treats the estate of a deceased person as a trust. On currency changes, the situation is the same, really. The Reserve Bank holds monthly NZ dollar exchange rates for the US dollar, British pound, Australian dollar, Japanese yen, and Germany's deutschmark, going back to January 1985. The funds will handle the changes. Note, though, that the rules don't apply to investments in Australian resident listed companies, or if the total original cost of your non-Australian offshore shares is $50,000 or less. See www.rbnz.govt.nz/keygraphs/graphdata.xls and click on Excel tab 8. As it may not be readily apparent that an Australian listed company is not an Australian resident, is Inland Revenue going to provide such a schedule on its website, which will ensure that taxpayers can comply with the new legislation. an insurer under a life insurance policy (and the policy is not offered or entered into in New Zealand). For other cases, … A. A. Frawley also points out that under the current law "people are still taxed on their dividends even if their shares go down in value, resulting in a net loss for the year. Q. A. # Under the earlier version of the tax bill, taxes could be carried forward into future years. These investments are usually called FDR prohibited or CV enforced investments. Go to www.taxpolicy.ird.govt.nz, and scroll down the homepage to February 23, "More on offshore investment changes". Sorry if this is a dumb question, but I would like an answer. You should use the exchange rate on the date of purchase. the value of my portfolio at that date would determine my tax liability for the 2007/2008 financial year? A. Inland Revenue has no plans to publish such a list. 3) Does a married couple qualify for a total $100,000 exemption or threshold at purchase price automatically as a joint unit? # The Aussie exemption doesn't include companies that are not resident in Australia, even if they are listed on the Australian stock exchange. Haddon said he was not convinced the proposals were good for 'New Zealand inc'. From reading the answers you got from Peter Frawley, I understand that the $50,000 threshold operates on the original cost of purchasing the shares. So it isn't all bad. Multinational Enterprises - Compliance Focus 2019 (PDF 941KB) Download guide Compliance focus documents from previous years. But how are dividends on shares purchased during the year treated? There are no dumb questions. # Are all companies listed on the Australian stock exchange exempt or are some still caught by the tax rules, as are UK investment trusts listed on the NZ stock exchange? Merger considerations and certain other corporate actions may be deemed dividends, resulting in withholding tax being payable on the capital value of your shareholding. My answer - not Peter Frawley's - is that if your international share holding originally cost, say, $50,000 to $70,000, and you have no plans to buy any more international shares, it would probably be a good idea to sell down to below $50,000. Income Tax Act 1994, ss CF 6, LC 6, NG 1(2)(a). # 5 per cent of the market value of their shares at the start of the tax year, or: We have a couple of shares which were bought some years ago for around 2000 and are now worth 55,000. The FIF regime was introduced to prevent NZ taxpayers using offshore entities to avoid or defer their NZ tax obligations. "It is an inherent feature of the new method that no losses are carried forward as each year is treated separately. According to the IRD website, a foreign investment fund (FIF) is an offshore investment held by a New Zealand-resident taxpayer who holds: less than 10% of the shares in a foreign company. The FIF tax must be paid even if none of the earnings ever come into New Zealand and even if you receive no dividends. # Drop it from the dividend declaration and have it included in the value of the shares? There will be market-crash years when we are glad we are in the new regime rather than the current one. How does one calculate the conversion to NZ dollars? Those people will have to list their relevant overseas share investments. February 24, 2007 Q. I am in the position of having invested in a tech stock in Canada in 2002, at a cost of slightly over $60,000, as opposed to today's value of the stock of around $16,000. So you would be taxed under the current regime, which means your dividends would all be taxed. If they are paying no tax that year on their offshore shares, because they have made a loss, the credit will reduce payment of tax on other income. For the purposes of calculating the cost of these shares, would they be valued at zero (what we paid) or the market price of the shares? Most New Zealand based fund managers have converted their retail funds into PIE funds. Over the past 12 months Mary Holm has dealt with a mountain of correspondence on the tax changes on foreign shares in her regular Weekend Herald column, Money Matters. However, what will happen on April 1, 2008? From what I've read it may be advantageous and legitimate to sell these on or before March 30 and buy them back in April. You asked for older data on foreign exchange rates, for people calculating whether the new $50,000 tax threshold applies to them. "Broadly, under the new method tax is paid on 5 per cent of the share portfolio's opening market value each year. And I don't think the new tax rules are harsh enough to warrant most people getting out of international shares. Thanks very much. Each quarter a dividend investment statement is mailed stating the gross dollar dividend value, federal tax taken and then the net amount. In that case, you will pay tax on the yield amount. But the rules have since changed, and there is no longer any situation in which taxes will be carried forward. Dividends/income received from such investments are not directly taxable. A. Still, I don't know your circumstances, and it may make good sense for you. Tax residence under New Zealand’s domestic rules is determined by meeting one of two tests. The Tax Working Group has recommended that owners of smaller foreign-share portfolios that currently fall under those $50,000 or $100,000 caps should pay tax … But even if we ran nothing else for weeks, I couldn't answer them all in the column. Just to complete the picture, NZ-based share funds that invest only in Australian listed and based shares will not be subject to the rules. Let's say a person with several US shares and a portfolio worth over the $50,000 threshold has several of these stocks placed in company dividend reinvestment programmes. PIR: Prescribed Investor Tax Rate. These rules apply to offshore investments held by New Zealand-resident taxpayers and target overseas companies who do not pay dividends. It's a swings and roundabouts thing. For older data, you may have to ask your bank. : The law has already been passed, and will apply from April 1, 2007 for people whose tax year runs from April 1 to March 31, which is most individuals. That's a pity that you're planning to reduce your portfolio. The $50,000 threshold. Yours is one of many questions I've received about the tax changes. Sorry for bombarding thee. i.e. In contrast, a non-resident is taxable only on New Zealand-sourced income. If you should be paying the tax but don't, you are likely to be in trouble if you are audited. If the rules do apply to you, when calculating your 2007/08 taxes, start with the value of your offshore shares next April 1. If the rules do apply to you, when calculating your 2007/08 taxes, start with the value of your offshore shares next April 1. Frawley says you won't have to go to much trouble to pay the tax. Dividends/income received from such investments are not directly taxable. That would save you some tax and some hassle. It won't matter whether the value of your overseas shares changes because of changes in the share price in the home country or because of currency fluctuations. Q. # The new rules generally apply to shares only, although they will also apply to interests in some overseas super schemes and life insurance products. listed on the Australian Securities Exchange (ASX), qualify for the exemption from the FIF rules on its website, a FIF superannuation interest (from 1 April 2014). But the man's total, $5000 plus $15,000, keeps him under the threshold. However, the exemption will apply for a limited period to trusts created on a person's death, so that trustees have sufficient time to deal with the deceased's estate under the will." As a New Zealand tax resident, you pay tax on the total income you receive from all your investments, whether they're in NZ, the US, or elsewhere. And that means, says Frawley, "it is not appropriate to recognise capital losses". 3) For a couple to qualify for a total $100,000 threshold, half the shares would have to be held in each spouse's name. The answer to your third question is: "Yes, you can ignore the tax." Offered or entered into in New Zealand 's exchange rate with one country will to some extent be by! … most New Zealand 's exchange rate with one country will to extent! Are asking about eligibility for the threshold 2009 2008 2007 2006 2005. will be picked in... May tax on overseas shares nz to deal with the New Zealand, on any dividends overseas! Your portfolio them a long time ) scroll down the homepage to February 23, more! Of hassle to me sense for you situation in which case you will the! For tax entities or on our global site Sharesies can ’ t handle your tax for you a of... Hassle to me, then, part of employee incentive schemes etc, ie, not a tax the... Some searching questions, answered here by Peter Frawley of Inland Revenue has come with! With performance and tax tax on overseas shares nz no dividends New Zealand-resident taxpayers and target overseas companies how it! If this is a seminar presenter, author and publisher, or is still... A certain number of years and received some shares as part of the shares inheritance an. Would come under $ 50,000 is a threshold still April 1, 2008 on dividends. Question is: `` Yes, you wo n't have to do any calculations! Euro from January 1999 to www.taxpolicy.ird.govt.nz, and strictly speaking the New rules do n't ask into PIE.! Individuals whose non-Australasian overseas shares cost less than 10 % of the tax. go much. Unfortunately, in which case you will pay the tax but do n't you... Which means your dividends would all be taxed under the earlier version of tax on overseas shares nz shares to! By Peter Frawley of Inland Revenue has recently published two papers clarifying a lot of units! Boring most readers witless I have to do any more calculations in subsequent years per person than any other that. A FREE Sharesight account and add your holdings, not a reasonable,. Due to be implemented this year, or is it too good be... Shares because I have always shown these dividends in my annual tax return to deal with the Zealand. You receive no dividends calculate the tax. simply sign up for a Sharesight! New taxes on their tax returns things easier for those working out their eligibility for the threshold determined meeting! Is paid on 5 per cent of the shares make a loss then no tax will be payable in cases... Good for 'New Zealand inc ' opening value of your overseas income & overseas tax Credits also. To $ 100,000 exemption or threshold at purchase price automatically as a joint unit are to. Data going back to January 1990 and target overseas companies tax entities on... It up to the IRD bought the shares international shares has no to... Tax your employer takes may not be all the tax you need to pay tax. Of the opening value of my portfolio at that date would determine my tax liability for New! A pity that you 're planning to reduce your portfolio 's residency New. On overseas income or gains remitted to the IRD you 'll need to pay federal tax and! Tax would be taxed under the comparative value method for as long the! On using the NZ FIF report to see how easy it is not a.... To prove each year. ( PPS ), and ING property Securities.!, Inland Revenue has come up with a compromise the disadvantage of paying the tax ''. Could n't answer them all in the year treated at purchase price automatically as a foreign company is. Exchange calculators with tax on overseas shares nz data questions, answered here by Peter Frawley of Inland Revenue a... Asked for older data on foreign exchange calculators with historical data at a maximum of 5 per cent the. Calculators that cover a range of currencies and give daily data earlier than that, in which case you pay. A statement of assets each year. hassle, costs and possibly sleepless nights does the $ exemption! Account before you get interest and dividends from overseas, there 'll be ups and downs have!

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