Tax changes benefitting returning New Zealanders and new migrants

Anticipated changes to the foreign investment fund regime

The New Zealand Government announced its intention to make changes to the foreign investment fund (FIF) regime to minimise its deterrent effect for new migrants and returning New Zealanders. It's essential that these individuals understand the proposed FIF changes and how they might be impacted.

What is the foreign investment fund regime – and what are the proposed changes?

The FIF regime includes several methods to determine taxable income in instances where a New Zealand resident holds less than 10% interest in foreign companies. The Government is proposing to introduce a revenue account method as an additional optional method for determining taxable income.

Generally the revenue account method would only apply to FIF investments in unlisted entities. Under the revenue account method, the taxable income would be dividends received plus 70% of realised capital gains. A realised capital loss can be used to offset the taxable income calculated under the revenue account method in the same or future years. An exit tax may apply when a person who applied the revenue account method ceases to be a New Zealand resident.

When would the changes come into effect?

The revenue account method would apply from 1 April 2025 to new migrants who became fully tax resident in New Zealand on or after 1 April 2024. Returning New Zealanders would also be eligible to use the revenue account method if they have not been a tax resident for a minimum number of years. The minimum number of years is yet to be confirmed, but it likely to be less than the 10 years of non-residence required for transitional migrant status. The trustee of a trust may also use the revenue account method if the principal settlor of the trust would be eligible to use the method in relation to the particular FIF interest.

The proposed changes are expected to be included in a Bill to be introduced in the second half of 2025. The Bill will be subject to the usual select committee process and public submissions.

What else should returning New Zealanders and new migrants consider before moving?

In addition to the proposed FIF regime changes, individuals moving to New Zealand should consider their tax residency status, transitional tax residency and foreign superannuation taxation. Read our article here to learn more about the key tax considerations to think about before moving or learn more about our Global Tax Immigration Services here.  

If you’re thinking about moving to New Zealand or have already arrived and want guidance on your tax matters, BDO can help. Reach out to your local BDO adviser to learn more.