NEW ZEALAND Trends and Developments Contributed by: Brent Wicks, Violet Yu, Jonathon Russell and Sandy Chen, Cone Marshall Limited
FIF income is called attributing interests because no realisation of income is required. There are three cat - egories of how an investor holds rights to which the FIF rules apply: • the investor holds direct income interest in a for - eign entity; • the investor holds a right to benefit from a FIF superannuation; and • the investor holds a right to benefit from a life insurance policy where a FIF is the insurer, and such insurance policy is not available in New Zea - land. These rules are intended to ensure there is no tax advantage for New Zealand resident investors to invest overseas. However, new migrants with exist - ing non-New Zealand investments may not have been aware of FIF rules at the time of investing, or even had the intention of moving to New Zealand at the time of investing. This creates problems, especially if the investments are illiquid. The government introduced changes in the FIF rules so that from 1 April 2025 onwards, for new immigrants and returning New Zealanders, it will be the actual income realised that will be calculated as taxable under the FIF rules. Under this method, such inves - tors will be taxed based on dividends received. The attributable gain and relevant tax will only apply after this special category of investors become tax resi - dents in New Zealand. Moreover, only 70% of such capital gain will be taxable. For trusts, if the principal settlor is eligible to apply under the changed rules, then the trustee may also be able to apply this method of calculation of taxable income under the FIF rules. The government is proposing to include these chang - es in the next Tax Bill, which may be introduced in the latter half of the year 2025. There may be further reviews of the FIF rules and their impact on New Zea - land residents. Investing in New Zealand: Overseas Investment Act 2005 Investment in New Zealand by overseas persons or entities generally requires the Overseas Investment Office’s consent if such investment is one of certain
categories defined in the Overseas Investments Act 2005. The government has announced plans to reform the Overseas Investment Act 2005 to make it easier for overseas persons or entities to invest in New Zealand. The Cabinet has approved details of the proposed reforms, with the new legislation expected to be in place by the end of 2025. The proposed new legislation will amend the purpose of the Act to recognise the benefit of overseas invest - ment in New Zealand, in contrast to the current pur - pose of recognising that it is a privilege for overseas persons to invest in New Zealand’s particular assets. Other proposed changes include: • allowing for a fast-track process for assessing some consent applications; • giving more powers to the government to poten - tially intervene (on rare occasions); and • giving the Land Registry system in New Zealand (LINZ) more power to grant consent without involv - ing Ministers. The reform seeks to make New Zealand more acces - sible for overseas investment and lower the threshold for overseas persons and entities to invest in New Zealand. Active Investor Plus (AIP) Visa The AIP visa allows applicants to live, work and invest in New Zealand indefinitely. From 1 April 2025 onwards, there will be changes to the two investment categories under this visa route, namely growth cat - egory and balanced category. Under the new growth category, there is a requirement of minimum investment of NZD5 million over a period of 36 months, and that the direct investment is made to New Zealand business and certain approved man - aged funds. Under the new balanced category, there is a require - ment of minimum investment of NZD10 million over a period of 60 months. There is a wider scope of acceptable investments including investments under
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