If you're a New Zealand tax resident who owns shares in overseas companies, you've probably run into the term FIF tax and found that almost nobody explains it in plain English. Here's the short version.
What a FIF actually is
A Foreign Investment Fund (FIF) is, broadly, an investment in a foreign company or fund that isn't taxed the ordinary way. Most overseas shares held by NZ investors are FIFs: US-listed companies bought through Hatch or Sharesies, an S&P 500 ETF, or shares held in Interactive Brokers.
Here's the idea. Instead of taxing the dividends and capital gains you actually receive, the FIF rules tax a notional income figure worked out from the value of your holdings. That figure goes on your IR3 alongside your other income.
💡 Good to know: New Zealand has no general capital gains tax, but the FIF rules are the closest thing for overseas shares. They can tax you on paper gains you haven't sold.
Who's caught
You're generally within the FIF rules if you're an NZ tax resident holding attributing interests in foreign companies. There are exemptions, most notably certain Australian-resident listed companies and the de minimis threshold below.
The threshold that lets most people out
This is the part most small investors miss: if the total cost of your overseas shares stayed under NZ$50,000 across the whole tax year, the FIF rules generally don't apply to you at all. You'd just return any actual dividends instead.
That single test, explained in the $50,000 de minimis threshold, decides whether you need to do any of this at all.
If FIF does apply
You then choose how to calculate your FIF income. The two main methods, FDR and CV, can produce very different results. That's the whole subject of FDR vs CV: which method should you use?
In short
- Most overseas shares held by NZ residents are FIFs.
- FIF tax falls on a calculated income figure, not just the dividends you actually received.
- Under NZ$50k of cost? The rules probably don't apply, so check the de minimis test first.
- Over the threshold? Pick the method (FDR or CV) that gives the lower income.
This guide is general information, not tax advice. Always verify figures against IR461 and your year-end statements, and check anything important with a qualified NZ accountant before filing.