In many cases, Resident Withholding Tax (RWT) or PIE tax is automatically deducted from you at a certain point in time, like when the income is paid – in the same way PAYE tax is deducted from your salary or wages. The $50,000 threshold. * * * 4) Would you recommend a couple to sell down to $99,999 at purchase price in order to avoid the considerable problems of proving each year that shares purchased perhaps 40 years ago were indeed purchased at a seemingly low price? January 13, 2007 Q. I have a portfolio of shares directly invested in overseas companies. This is an annual tax on the rise in value of your holdings, not a tax on the sale. This is an annual tax on the rise in value of your holdings, not a tax on the sale. In answer to your first question, "under the new fair dividend rate method dividends are not taxed separately and therefore do not need to be included in a person's tax return," says the IRD's Peter Frawley. # Under the earlier version of the tax bill, taxes could be carried forward into future years. i.e. If you get interest and dividends from overseas, there are different rules depending on your situation. A. Inland Revenue has no plans to publish such a list. Those people will have to list their relevant overseas share investments. And over the years, there'll be ups and downs. Inland Revenue has recently published two papers clarifying a lot of the issues people are asking about. For a start, if you hold your international shares directly - as opposed to in a managed fund - and they cost less than $50,000 when purchased, you are exempt. You buy and sell shares through a stock broker To buy and sell shares on the stock exchange (called ‘trading’) you’ll need to place an order through a stock broker – this is a company licensed to … # Include the dividend as usual and not enter it in the value of the shares, or "A person may choose to treat shares acquired before 2000 as costing half their market value on 1 April 2007 for the purpose of the $50,000 threshold," says Frawley. The FIF regime was introduced to prevent NZ taxpayers using offshore entities to avoid or defer their NZ tax obligations. But a capital gains tax on those shares could see investors move towards more investment in overseas shares. This may seem a trivial question, but it becomes important if the $50,000 is a threshold rather than an exemption and one is close to the $50,000 limit. Unfortunately, in your case that means that your shares don't qualify for the threshold. Frawley says there are several websites that have foreign exchange calculators with historical data. Most New Zealand based fund managers have converted their retail funds into PIE funds. He adds that "individual facts and circumstances are taken into account". And if the value of my investment is $49,000 on April 1 and then $49,000 the following March 31, can I ignore the tax regardless of how much it goes up (and assuming I sold bits during the year) in between? The normal rule applies, of course, that when someone dies taxes are paid on their income in the year of their death. The FIF regime was introduced to prevent NZ taxpayers using offshore entities to avoid or defer their NZ tax obligations. We have a couple of shares which were bought some years ago for around 2000 and are now worth 55,000. Q. All investors will see is lower returns. You will simply be asked if they cost more than that, in which case you will pay the tax. # The total return on the shares - including dividends and any gain in price - during the tax year. 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. 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. Inland Revenue is being unfair, if it leaves it up to the taxpayer to determine a company's residency. The woman's total would be $40,000 plus $15,000 (half of $30,000), which brings her over the threshold. Her advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. If you are a resident, but non-domiciled, the amount of UK tax you have to pay on foreign income and gains may sometimes depend on whether or not you bring money or assets into the UK. February 17, 2007 Q. It's a swings and roundabouts thing. Our sub-custodian deducts your tax at source, and pays the overseas tax authority directly. Still, I don't know your circumstances, and it may make good sense for you. Sorry if this is a dumb question, but I would like an answer. Individuals will pay tax, at their personal tax rate, on the lower of: As the new tax regime on shares in countries beyond Australasia takes effect, many taxpayers seem to think it's tougher than it really is. They don't apply to overseas property, bonds or cash. You'll need to pay tax on your overseas income even if: you do not bring it into New Zealand. Her website is www.maryholm.com. We worked in Ireland for a number of years and received some shares as part of employee incentive schemes etc, ie. My holdings will probably then be well over $50,000 (I've had them a long time). employers navigate New Zealand’s tax and employment related matters; we provide advice about tax planning opportunities, management of assignment policies and the provision of New Zealand tax filing services. "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. 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. Frawley says you won't have to go to much trouble to pay the tax. The idea is to be able to recognise certain franking credits for New Zealand tax purposes. Q. Do any readers know of any? Basically, as long as you buy no more non-Australasian shares, you stay outside the new rules forever. In general, there are two methods in which you pay tax on your investments. For example BHP Billiton and Rio Tinto are dual listed in Australia and Britain, but are they resident in Australia? # The $50,000 applies separately to each investor. For other cases, … Simply the best portfolio management tool for DIY investors. Key features of New Zealand’s tax system include: 1. no inheritance tax 2. no general capital gains tax, although it can apply to some specific investments 3. no local or state taxes, apart from property rates levied by local councils and authorities 4. no payroll tax 5. no social security tax 6. no healthcare tax, apart from a very low levy for New Zealand’s Accident Compensation injury insurance scheme (ACC). # Does "overseas investment", i.e. Is it the rate that applied at the date of purchase, and if so where can one find out the exchange on a certain day, say in 1997. As a consequence of the new tax law coming into force I will be reducing the portfolio substantially. A. Do I have to revalue on April 1, 2008 or does the $50,000 exemption last forever? 3) Does a married couple qualify for a total $100,000 exemption or threshold at purchase price automatically as a joint unit? Act articles 2020 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005. Or do the shares have to be held specifically 50/50 in each individual name? March 10, 2007 Q. I follow your columns on taxing of overseas shares because I have shares and unit trust investments in Canada. Go to www.taxpolicy.ird.govt.nz, and scroll down the homepage to February 23, "More on offshore investment changes". Haddon said he was not convinced the proposals were good for 'New Zealand inc'. But changes in New Zealand's exchange rate with one country will to some extent be offset by changes with another country. We've collated for you a selection of questions Mary has answered since the taxation legislation passed late last year. 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. No tax will be payable if the shares make a loss, after taking the dividends into account. Richard Prebble: China has silenced New Zealand, NZ regulator issues Bitcoin warning: Be prepared to lose all your money, It's mother vs. son in Britain's priciest divorce war, 'It's desperate down there': West Coast town hanging on for Govt help, Police seek skipper and yacht last seen in the Marlborough Sounds. Each quarter a dividend investment statement is mailed stating the gross dollar dividend value, federal tax taken and then the net amount. But it might be pretty hard to argue that you had any other purpose. 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. "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." 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? Australasian shares are usually lower than that. How does one calculate the conversion to NZ dollars? My holdings would come under $50,000 on purchase. So it isn't all bad. Tax Technical - Inland Revenue NZ. "The new fair dividend rate method seeks to tax an amount approximating a reasonable dividend yield on a person's investment each year," he says. And that means, says Frawley, "it is not appropriate to recognise capital losses". Go to www.rbnz.govt.nz/statistics/, click on "Exchange rates" on the left side, and then on "B1 historical series". Multinational Enterprises - Compliance Focus 2019 (PDF 941KB) Download guide Compliance focus documents from previous years. "If the shares make a loss then no tax is payable," adds Frawley. Q. February 3, 2007 Q. I have some questions regarding the $50,000 exemption with respect to the new overseas tax legislation: Q. IR330C - choose a tax rate for your schedular payments. Some not-so-good news from Frawley: "The person in this example is treated, for the purposes of the $50,000 threshold, as having acquired the shares for their market value at the time they received the shares under their employee incentive scheme." These investments are usually called FDR prohibited or CV enforced investments. 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." # 5 per cent of the market value of their shares at the start of the tax year, or: And, knowing that people are thinking of using this strategy, I wouldn't be surprised if Inland Revenue takes particular interest in share trading over the next few months. Also Rinker's main business is in the United States, but is it resident in Australia? It's irrelevant what happens to their value after purchase. From 1 October … at no cost to us. I must admit that sounds like a fair amount of hassle to me. Perhaps you could answer a few points for your readers e.g. The answer to your third question is: "Yes, you can ignore the tax." Read our guide on using the NZ FIF report to see how easy it is. Yours is one of many questions I've received about the tax changes. Carrigan adds, "The $50,000 exemption does not generally apply to trusts and estates. "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. A. To make things easier for those working out their eligibility for the threshold, Inland Revenue has come up with a compromise. A. But even if we ran nothing else for weeks, I couldn't answer them all in the column. What happens if a married couple each are close to this exemption level and one dies, leaving their assets to the survivor (trusts and estates have no exemption)? You are also liable for tax in New Zealand, on any dividends from your overseas holdings. You should use the exchange rate on the date of purchase. "It is an inherent feature of the new method that no losses are carried forward as each year is treated separately. 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) 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 Does this investment strategy make sense for the first year, or is it too good to be true? less than 10% of the units in a foreign unit trust. Nevertheless, strictly speaking the new tax is not a capital gains tax. The FIF tax must be paid even if none of the earnings ever come into New Zealand and even if you receive no dividends. 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 I think Frawley is politely trying to tell you the new rules will be easier than the old ones, so what are you moaning about! However, with the new system due to be implemented this year, what does one do? You don't have to do any more calculations in subsequent years. Because of this, many New Zealanders invest only locally or in Grey List countries. A. If that total rises above $50,000, you will be taxed under the fair dividend rate rules. Tax for non-resident taxpayers. A. See www.rbnz.govt.nz/keygraphs/graphdata.xls and click on Excel tab 8. 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. On your first question, that's one way of looking at it. By the way, you won't have to prove each year that your shares cost less than $50,000. Pre-register here! In such cases income is calculated under the comparative value method for as long as the person owns the investments. 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 … This is then converted to a certain number of shares, which are added to the base shareholding. Examples are Private Portfolio Service Master funds (PPS), and ING property Securities Fund. A tax resident is taxed on worldwide income, with a tax credit allowed if taxes are paid overseas on foreign sourced income. 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 other country or territory has deducted tax. By compiling all your portfolio data in one place, Sharesight eliminates the paper-chase and headaches normally associated with performance and tax reporting. # The new rules generally apply to shares only, although they will also apply to interests in some overseas super schemes and life insurance products. Example Take for example, a New Zealand tax resident who: » Acquires shares in USCo with a cost of $40,000 on 1 July 2013 » Acquires shares in UKCo with a cost of $20,000 on 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. For some investments, New Zealanders are not allowed to use the FDR method. This means a New Zealand resident receiving an inheritance from an overseas estate is treated as receiving a distribution from a foreign trust. 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. The IR330C form is the IR form you need to complete to choose the rate of tax you have deducted from your payments. However, help is at hand. if you have $51,000 at purchase price, is $1,000 in the new system and subject to the tax and $50,000 exempt and taxable on income only, or is all $51,000 now included? will be your status as a New Zealand tax resident. an insurer under a life insurance policy (and the policy is not offered or entered into in New Zealand). Is taxable dividend income still capped at 5 per cent of the opening value of the portfolio (ie. The New Zealand stock exchange is the NZX and the Australian stock exchange is the ASX. However, Frawley says "The Reserve Bank monthly data will be acceptable to Inland Revenue for the purposes of applying the $50,000 threshold." In effect, then, part of the tax will sort of be on capital gains. 4) In light of what we've said above, let's change this to "Would you recommend that a person sell down to $49,999." A. If that is the case, you will be subject to tax only on overseas income or gains remitted to the UK. Tax residence under New Zealand’s domestic rules is determined by meeting one of two tests. This is your personal tax rate. 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. So you would be taxed under the current regime, which means your dividends would all be taxed. Inland Revenue has already published a summary of the new offshore tax rules on its website, www.ird.govt.nz (under "news and updates"), and it plans to publish a more detailed explanation of the rules on its website shortly. In contrast, a non-resident is taxable only on New Zealand-sourced income. Under the new fair dividend rate method no tax would be payable in such an income year." US tax: $1.50 USD (one-off), $0.50 a year A one-off $1.50 USD fee is deducted from your first deposit to cover the set-up, and after that, a $0.50 fee is deducted from your account each year to sort your US taxes for you. For older data, you may have to ask your bank. I've had trouble finding any other calculators that cover a range of currencies and give daily data earlier than that. The amount of tax your employer takes may not be all the tax you need to pay. It also covers managed funds held overseas and … The $50,000 threshold is based on the original cost of offshore shares. A. They facilitate international tax compliance in accordance with New Zealand tax law. # If tax due is accrued is it still to be wiped upon death? But I guess investors will get used to noting the value of their international shares on April 1 each year, and keeping track of dividends. I will include more in the next few weeks. As noted above, being a New Zealand tax resident, you'll generally pay tax on your worldwide income. But if you bought your shares before the early 1990s, using this shortcut will probably give you considerably higher share costs than were in fact the case - although as long as the total is still under $50,000, that doesn't matter. These rules apply to offshore investments held by New Zealand-resident taxpayers and target overseas companies who do not pay dividends. Generally New Zealanders don't have enough invested in overseas shares - in terms of reducing their risk by spreading their money into different investments.