Capital Gains Tax on Overseas Investments

[jennywilliam]

Can anyone explain how exactly we are taxed for overseas investments? I have spent a lot of time trying to google exactly what happens but haven’t found a clear answer yet. I’ll give two scenarios.

1. Investing directly in a company e.g. google through sharsies, stake etc. Do we still pay US capital gains tax?
2. Investing in NZ based funds registered with IRD as PIE e.g. Smartshares US 500 ETF. The information is clear about the tax rate here being up to 28% maximum but not clear if this is only on dividends or includes on capital gain.

Thanks very much in advance for any responses.

 

[crkodn]

@jennywilliam

1. Assuming it's over 50k then you are automatically under FIF tax reporting. Look into this as it has its own rules. So yes, you pay NZ FIF tax. Not usa capital gains.
   Note: if you have less then 50k & are trading frequently enough to be considered a trader then yes. You will also pay tax here. There is a bit of Grey area around what a trader is but buying with intent of selling in short term is a trader. Multiple transactions will also expose you to this.
   Once you have hit 50k NZD invested in sharesies, hatch etc. You will pay FIF.
2. 28% is for PIE investments. Dividends are not taxed at PIR like other distributions.

3 - look into the money guide help. If you struggle to do FIF yourself. An accountant can help the first year.

 

[tessy40]

@crkodn What happens if one has >$50k invested and trades as well? FIF and income tax on top?

 

[crkodn]

@tessy40 Well yea. If your trading, then EVERY single one of your transactions will become a taxable event.

You are in the business of trading.

Make $10k profit. That's x% tax.

 

[tessy40]

@crkodn I understand that trading is seen as work and profits as income. Will I pay normal income tax or FIF income tax? Surely not both?!?

 

[crkodn]

@tessy40 Just my opinion.

1. Trading isn't sustainable or efficient. Most traders lose money.. I'm guessing by your question you are new to stocks or first time investing 50k+. Do a bit more DD into this world.
2. Best to speak to an accountant. If you end up trading, there are other tax considerations that an accountant can help you with.

 

[path_finder]

@jennywilliam Give this a read:

https://moneykingnz.com/tax-on-foreign-investments-how-do-fif-and-estate-taxes-work/

 

[jennywilliam]

@path_finder That was a really helpful article, cheers.

 

[path_finder]

@jennywilliam Good luck mate.

 

[jesusislord1076]

@jennywilliam Are your overseas investments greater than 50K nzd?

Rules vary depending on this number