The proposal to tax these schemes on a receipts only basis should alleviate the cash-flow difficulties with the current Foreign Investment Fund (“FIF”) rules.
The inclusion rate approach is also appealing. This taxes a percentage of the receipt based on the time the holder of the scheme has spent in New Zealand.
However, we have concerns this formula has potential to over-tax distributions. KPMG supports the proposed amnesty for past non-compliance (which is likely to be significant, mainly due to lack of understanding about the rules).
The intention should be to encourage voluntary disclosure to Inland Revenue and remedying the default, rather than penalising, in many cases non-deliberate, non-compliance.