If you invest in overseas shares through Sharesies, Hatch, InvestNow, or a direct brokerage, you are likely subject to the Foreign Investment Fund (FIF) regime. This is one of the more complex areas of NZ tax, but for most retail investors, the Fair Dividend Rate method simplifies it significantly.
The FIF regime taxes overseas share investments on a deemed return basis, not just dividends received. Most investors use the Fair Dividend Rate (FDR) method: you are taxed on 5% of the opening market value of your overseas investments each year, regardless of dividends actually paid. This applies if your total cost in overseas shares exceeds NZD $50,000. Under $50,000, you're only taxed on actual dividends and are exempt from FIF.
What Is the FIF Regime?
The FIF regime was introduced because NZ investors could avoid tax by holding overseas shares that reinvested gains rather than paying dividends — the portfolio would grow tax-free. FIF taxes a deemed return on overseas investments each year, whether or not income was actually distributed.
FIF applies to interests in foreign companies, including:
- Directly held overseas shares (e.g., US, Australian, UK stocks via Hatch or Sharesies)
- Overseas-domiciled managed funds
- Some overseas life insurance policies
The $50,000 Exemption
If the total cost of your overseas share portfolio is $50,000 NZD or less, you are exempt from FIF. You only pay tax on actual dividends received (taxed as ordinary income).
The $50,000 threshold is based on the cost of your holdings (what you paid), not the current market value. Once you cross $50,000 in cost, FIF applies to your entire overseas portfolio (not just the portion above $50,000).
Example:
- You have invested $42,000 in US shares → FIF exempt, pay tax on dividends only
- You invest a further $12,000 → total cost $54,000 → FIF applies to the entire portfolio
Australian Companies: Partial Exemption
Shares in Australian-resident companies listed on the ASX that are in the NZ Foreign Investment Fund Exemption List (AUS-listed shares with franking credits) are exempt from FIF. For these shares, you pay tax only on dividends actually received, regardless of portfolio size.
This is a significant concession because ASX-listed shares are a common investment for NZ investors. Check IRD’s FIF exemption list to confirm whether a specific ASX company qualifies.
The Fair Dividend Rate (FDR) Method
Most suitable for: Investors holding a portfolio of overseas shares worth over $50,000
The FDR method taxes you on 5% of the opening market value of your overseas investments at the start of the tax year (1 April). This is a deemed return — actual returns (whether higher or lower) do not matter.
Calculation:
- Total market value of overseas shares on 1 April (start of tax year)
- Multiply by 5%
- This amount is included in your assessable income and taxed at your marginal rate
Example:
- Overseas portfolio value on 1 April 2025: $80,000
- FIF income (FDR): $80,000 × 5% = $4,000
- Tax at 33% marginal rate: $4,000 × 33% = $1,320
Note: If your portfolio declined during the year, you still pay tax on 5% of the opening value. This is the “cost” of simplicity under FDR.
When FDR Is Beneficial
FDR works best when your actual returns exceed 5% — you pay tax on only 5% of value even if the portfolio grew by 15%. In a bull market, this is highly tax-efficient.
When FDR Is Costly
If your portfolio had negative or near-zero returns, FDR taxes a 5% deemed return on a portfolio that did not actually earn it.
The Comparative Value (CV) Method
Most suitable for: Investors whose portfolio declined in value or earned less than 5%
The CV method calculates income as:
FIF income = (Closing value + Disposals) − (Opening value + Acquisitions)
This is effectively the actual economic return — capital growth plus distributions, minus capital losses.
If the CV calculation produces a loss, the FIF income is zero (losses are not deductible, but you do not pay tax on a negative return).
If CV produces a positive return less than 5% of opening value, you pay less tax under CV than FDR.
The Catch
You must choose FDR or CV per country or fund type (not per individual share). You cannot switch back to FDR in future years if you switch to CV (though you can switch from FDR to CV each year). Most accountants recommend FDR as the simpler default.
How to Report FIF Income
FIF income is reported on your IR3 as a separate income source:
- Calculate FIF income using FDR or CV method
- Enter on the IR3 form in the “FIF income” section
- Tax is calculated at your marginal rate on the FIF income amount
IRD’s IR3 guide includes a FIF worksheet (IR3F) to help with the calculation. Platforms like Sharesies, Hatch, and InvestNow are increasingly providing tax reports that include FIF calculations for your portfolio — check your platform’s tax report section.
FIF and Overseas ETFs
If you invest in overseas ETFs (e.g., US-listed ETFs like VTI, VOO, or SPY through Hatch), the FIF regime applies if your cost exceeds $50,000. Note:
- NZ-domiciled funds (e.g., Smartshares, Kernel) that hold overseas assets are generally PIEs and are taxed under the PIE regime — not FIF — because the fund is NZ-resident
- Only directly held overseas shares and overseas-domiciled funds trigger FIF
This is why NZ investors in Kernel or Smartshares US ETFs do not deal with FIF themselves — the fund handles it internally.
Frequently Asked Questions
I have $45,000 in US shares. Do I need to file FIF?
No — below $50,000 cost, you are exempt from FIF. Declare dividends as income but no FIF calculation is needed.
I invested in Tesla shares through Sharesies. Is that FIF?
Yes, if your total cost in overseas shares exceeds $50,000. Tesla is a US company on the NYSE, which is not exempted. Under FDR, you pay tax on 5% of the value of your overseas portfolio on 1 April.
What exchange rate do I use to convert overseas holdings to NZD?
Use the IRD-approved rates (available on the IRD website). For year-end valuations, use the exchange rate on 31 March or an acceptable rate from your platform’s tax report.
Does FIF apply to my overseas KiwiSaver?
No. KiwiSaver funds are NZ-domiciled PIEs, even if the underlying investments include overseas shares. The fund deals with FIF internally. You pay tax at your PIR rate.
My Sharesies account shows a tax summary. Can I just use that?
Yes — Sharesies, Hatch, and InvestNow provide annual tax summaries that include FIF calculations. These are generally accurate, but it is worth reviewing the methodology against IRD’s rules, especially if your portfolio is large or complex.