What is FIF? New Zealand foreign investment fund tax in plain English

The foreign investment fund (FIF) rules are how New Zealand taxes most overseas shares, ETFs and funds that a New Zealand resident holds. If the total cost of yours was more than $50,000 on any day of the income year, all of them are in the rules for that year, and you work out a figure called FIF income, usually 5% of their value on 1 April. That figure goes on your IR3 in place of the dividends. This guide sets out who is in, what counts, the methods and the filing steps, in plain English.

What a FIF is

A FIF is a foreign company (including a foreign unit trust), a foreign superannuation scheme, or an insurer under a life policy that was not offered or entered into in New Zealand (IR461 p4). In everyday terms, that covers shares you own in overseas listed companies, overseas ETFs, and overseas managed funds.

Some things that feel like overseas investments are not FIFs (IR461 p4):

• bank accounts, term deposits and loans (these fall under the financial arrangements rules instead);
• overseas rental property;
• being a beneficiary of a foreign trust;
• an income interest of 10% or more in a controlled foreign company (CFC rules apply instead);
• foreign employment income.

The law sits mainly in subparts CQ, DN and EX of the Income Tax Act 2007 (IR461 p4). Inland Revenue’s main guide is IR461, last updated in April 2026, and we use its page numbers throughout.

The key idea is that FIF income is attributed to you. Inland Revenue puts it this way: “FIF income is attributed to an investor. This may mean an investor has FIF income before actually getting any money” (IRD FIF hub, 31 March 2026). You are taxed each year on a formula, whether or not you sold anything or received a dividend. Use our is it a FIF? checker if you are unsure about a particular holding.

Who is in the rules

The rules apply to New Zealand tax residents who are not transitional residents (IR461 p4). If you have recently moved here, you may be a transitional resident and outside the rules for a while; our new migrants tool and the transitional residents guide cover that.

For a resident, the main question is the $50,000 test. Individuals, and a narrow group of “type A” trusts, do not have to apply the FIF rules if the total cost of their FIF interests stays at or below $50,000 throughout the year (IR461 p5 and p9; ITA s CQ 5(1)(d)). Three points catch people out:

• It is cost, not market value. A portfolio that cost $45,000 and is now worth $80,000 is still under.
• It is any day. If your cost goes over $50,000 for one day, the whole year counts.
• It is a cliff. Once you are over, “all your attributing interests are subject to the FIF rules; the first $50,000 is not exempt” (IR461 p9).

Each person has their own $50,000, and jointly held shares are split between the owners (IR461 p9). Companies get no exemption, and on our reading of IR461 p24 an ordinary family trust is not a type A trust, so it has no $50,000 exemption either. The $50,000 threshold guide goes into detail, and our threshold checker tracks your cost day by day.

You may have read that the threshold is now $100,000. It is not. A bill introduced on 10 September 2026 would have raised it from 1 April 2026, but the bill lapsed when Parliament dissolved for the election and is NOT LAW. Our dated status page tracks it, and the proposal guide explains what would change if it came back.

What counts and what does not

This table covers the holdings people ask about most. “Counts” means the holding is a FIF interest and its cost goes towards your $50,000.

“ASX ETFs are exempt” is a common myth. The exemption is for qualifying Australian-resident companies on the official ASX list (IR461 p7); see the ASX guide. For the PIE side, see PIE funds versus direct shares and our FIF or PIE comparison.

How FIF income is worked out

There are six methods in the law: fair dividend rate (FDR), comparative value (CV), the cost method, deemed rate of return, the revenue account method, and attributable FIF income (IR461 p10). Most individual investors only need the first two.

• Fair dividend rate: 5% of the market value of your FIF holdings on 1 April, plus a quick sale adjustment if you bought and sold the same shares within the year (IR461 p11 and p14; ITA s EX 52). See the FDR guide and the quick sale guide.
• Comparative value: your actual gain for the year, counting closing value, sales and dividends against opening value and purchases (IR461 p11; ITA s EX 51). See the CV guide.

Under both, dividends and capital gains are “not usually taxed separately” (IR461 p10). The dividend is already inside the formula, so you do not add it again.

Individuals and family (type B) trusts may use CV instead of FDR in any year where it gives lower income, but they must use the same method for all their holdings that year (IR461 p14 and p16). A CV loss is reduced to zero; you cannot claim it against other income (IR461 p14). Companies and most other entities stay on FDR. The FDR or CV guide covers the choice, and the other methods guide covers the rest.

Worked example. Your FIF holdings were worth $80,000 on 1 April 2025 and $88,000 on 31 March 2026. You received $1,600 of dividends and made no trades. Your other taxable income is $70,000.

You return $4,000, not the $1,600 of dividends and not the $8,000 rise. In a year when the portfolio fell, CV would usually be lower, often nil. Our calculator works out both and picks the lower income, which is how IR461 p14 frames the choice. Tax is worked out on whole dollars, as on the IR3.

Currency in one paragraph

Everything is converted to New Zealand dollars. You pick one exchange rate method (actual rates, which Inland Revenue lets you take as the mid-month rate, or a rolling 12-month average) and apply it to all your holdings, consistently (IR461 p13). Once you start on the rolling average, you must keep using it every year (IRD overseas currency page, 4 November 2026). Our calculator uses IRD’s published rates by default. The exchange rates guide has the detail, and our rates tool looks them up.

Filing: what you actually do

If you are in the rules, you file an IR3 individual tax return. In short (IR3 2026; IR3G 2026 pp19 and 22; IR461 p21):

1. Put your FIF income in box 17B, total overseas income, along with any other overseas income.
2. Put the foreign tax you can claim as a credit in box 17A.
3. Complete the Overseas income summary (IR1261), one line per type of income and country.
4. Answer Question 40 (foreign rights disclosure), and file a FIF disclosure if one is required.

The steps are set out in the IR3 guide and the IR1261 and disclosure guide. Because no tax is taken at source on FIF income, a large figure can push you into provisional tax; see FIF and provisional tax.

Foreign tax taken from your dividends, such as US withholding, can be claimed as a credit, but only up to the treaty rate and only up to the New Zealand tax on that holding’s FIF income (IR461 p20). See foreign tax credits.

If you are under $50,000

Below the threshold, the FIF formula does not apply. You pay tax on the dividends you receive, and on gains from sales only if you hold the shares on revenue account, for example as a trader (IR461 p9). The dividends still go in box 17B with a foreign tax credit in box 17A. Our dividends under the threshold tool and the dividends guide cover this case.

You can also choose to apply the FIF rules while under $50,000, for example to use CV in a bad year, but that choice can keep you in the rules for the following four years (ITA s CQ 5(1)(d)(iii)).

Rules checked 12 November 2026. This is general information, not tax advice; check with your accountant, especially if you hold through a trust or company, or have recently arrived in New Zealand.

Questions

Do I pay FIF tax if I never sell?

Yes, if you are over the $50,000 threshold. FIF income is worked out each year from a formula, usually 5% of the 1 April value, whether or not you sold or received dividends (IRD FIF hub).

Are my dividends taxed on top of FIF income?

No. Under FDR and CV, dividends from FIF holdings are not taxed separately (IR461 p10; IR3G p21). Under CV they are part of the gain.

Is the first $50,000 tax free?

No. It is a cliff: if your total cost is over $50,000 on any day, all your FIF holdings are in the rules for the year (IR461 p9).

Is the threshold $100,000 now?

No. The bill that would have raised it lapsed at the election and is NOT LAW. $50,000 is the law for 2025/26 and 2026/27 as at 12 November 2026.