If your company received income from or while based overseas, between 1 April 2018 and 31 March 2019, show it in New Zealand dollars at Box 18B. If the company is a New Zealand resident for tax purposes, you must include any foreign contract or service income in Box 18B.
If the company held rights, such as shares, units or an entitlement to benefit in any foreign company, unit trust, superannuation scheme or life insurance policy, at any time during the 2019 income year, you may be required to calculate FIF income or loss.
If the company has an interest in a controlled foreign company (CFC), they must calculate any attributed income or loss from that interest.
Generally, the company will use the fair dividend rate to calculate FIF income.
The main exclusions from an interest in an FIF are:
investments in certain Australian resident companies listed on approved indices on the Australian stock exchange, that maintain franking accounts
interest in certain Australian unit trusts
limited exemptions for interests in certain venture capital interests that move offshore (for 10 income years from the income year in which the company migrates from New Zealand)
a 10% or greater interest in a CFC.
New rules were introduced in 2009 for calculating income or losses from a CFC.
If the company has an interest in a CFC, they must calculate any attributed income or loss from that interest.
Losses from a CFC can’t be used to offset domestic income or be included in domestic losses carried forward to the next tax year. Generally, these losses can only offset income or future income from CFCs resident in the same country as the CFC that incurred the loss.
When CFC income or losses are calculated under the new rules, transitional rules apply to the use of carried forward losses incurred under the old rules.
You can find more information on the rules at www.ird.govt.nz and in the Tax Information Bulletin (TIB) Vol 21, No 8 (October/November 2009).
What to show in your return
You can convert all overseas income and tax credits to New Zealand dollars by:
using the rates table available on our website (search keywords: overseas currencies)
contacting the overseas section of a trading bank and asking for the exchange rate for the day you received your overseas income.
If the income was received from a financial arrangement, refer to Determination G9A or G9C under section 90 of the Tax Administration Act 1994.
Write the total of the allowable overseas tax paid in Box 18A. Include in Box 18B income before the deduction of any tax. Credit for tax paid overseas will be limited to the amount of New Zealand tax payable on that income. Please note that Australian franking credits or tax credits on dividends from the United Kingdom can’t be claimed.
Staple proof of tax paid overseas to the top of page 3 of the return.
Foreign tax credits attached to dividends that are not required to be returned under the FIF rules can be claimed up to the amount of New Zealand tax payable on the FIF interest.
Some foreign dividends have New Zealand imputation credits attached or New Zealand RWT deducted. These credits are not subject to the foreign tax credit limitation rule.
Certain PIEs attribute their net income/loss and tax credits to the investors. Companies that are investors include the attributed income or loss in their tax return.
Each year, the PIE is required to provide an investor statement setting out the details of the income/loss attributed to the investor for the year. The statement also shows the various types of tax credits associated with the income that has been attributed. These tax credits are subject to the tax credit limits calculated in relation to the tax on the attributed PIE income.
The attributed PIE income/loss is included in the company’s return for the period that includes the end of the PIE’s income year. Generally, PIEs have a 31 March balance date.
The amount of income the company derives as a distribution by a PIE is excluded income unless it is fully imputed dividends from a listed PIE. Dividends from these PIEs are not liable for RWT.
For more information, go to www.ird.govt.nz or read the guides, Information for companies that invest in PIEs (IR857) and Portfolio investment entity: a guide for PIEs (IR860).