New Zealand


  • Service: Tax
  • Type: Regulatory update
  • Date: 27/10/2010


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Taxmail - Tax Bill changing non-portfolio FIF rules 

Issue 3, October 2010


The Government yesterday introduced the Taxation (International Investment and Remedial Matters) Bill (the “Tax Bill”).


The Tax Bill changes the rules for non-portfolio Foreign Investment Fund (“FIF”) investments. The new rules for non-portfolio FIFs mirror the active business exemption rules for shareholdings in controlled foreign companies (“CFCs”).

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The Government is also introducing:

  • an extension of the thin capitalisation rules to non-portfolio FIFs and a new thin capitalisation test for “low asset” companies; 
  • a 0% rate of Approved Issuer Levy (“AIL”) for certain qualifying bonds issued to non-residents; and
  • various remedial amendments to the international tax regime.

The Tax Bill and commentary are available at


The non-portfolio FIF changes are broadly in the form outlined in the discussion document that was released earlier this year. Our concern remains that the removal of the grey list will create compliance costs for no additional revenue.


However, the concession to allow consolidation of FIFs across multiple jurisdictions when applying the proposed active income test will be welcomed. 


Similarly, the new thin capitalisation test based on interest cover will be welcomed by taxpayers with significant (unrecognised) intangible assets for accounting purposes, who would miss out on interest deductions under the current thin capitalisation rules.

The 0% AIL proposal is part of the Government’s thrust to make New Zealand a more attractive destination for foreign capital and is a step in the right direction. 

Overall, the main changes in the Tax Bill are broadly taxpayer friendly and have, for the most part, been signalled well in advance.


If you have any questions on the above, please speak to your usual KPMG advisor or contact:

Dinesh Naik
Partner - Tax
Phone: +64 9 367 5867

Tony Joyce
Partner - Tax
Phone: +64 4 816 4512

Taxmail - Comment on topical tax issues from KPMG NZ Tax. 

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