IR7 Question 16 Overseas income

There are two situations covering the treatment of overseas dividends. Each owner or partner will need to determine which of the following applies to their share of foreign investments:

• If the shares have FIF income or loss calculated, don’t include any dividends paid from these shares on the IR7 return. Instead, show the calculated FIF income or loss at Box 16B.

• If the shares are covered by one of the FIF exclusions (see Foreign investment fund (FIF) income or loss), show the dividends at Box 16B.

Each owner or partner will need to advise their individual amount of either the FIF income or loss (or their FIF calculation method) or the dividend, to be included on the IR7 return. Show each owner’s or partner’s individual amount, plus any other allocation of overseas income, at Box 16B on the IR7 return and at Box 24F on the IR7L or IR7P form—see IR7 Completing your IR7L or IR7P. This information is also used in determining the income amount at Box 4 at IR7 Completing your IR7L or IR7P of this guide.

In either situation, include any qualifying overseas tax credits attached to the dividends at Box 16A. Some Australian dividends can have New Zealand imputation credits attached. Include these at Box 12. Please note you can’t claim Australian franking credits. If the partnership or LTC received dividends from an overseas company through an agent or trustee who deducted RWT in New Zealand or dividends treated as interest, show the New Zealand RWT deducted at Box 12A.

If at any time during the 2019 income year the partnership or LTC held rights like shares, units or an entitlement to benefit in any foreign company, foreign unit trust, foreign superannuation scheme or foreign life insurance policy, the partners or owner(s) may be required to calculate FIF income or loss in their own income tax return(s).

Generally, the partners or owner(s) will use the fair dividend rate to calculate FIF income. The partners or owner(s) may also need to file an additional FIF disclosure form. See Question 25 at Additional disclosure of foreign investments.

The main exclusions from an interest in a FIF are:

• investments in certain Australian resident companies listed on approved indices on the Australian stock exchange, that maintain franking accounts. Investments covered in the list are available in the Australian share exemption list (IR871)

• interest in certain Australian unit trusts

• limited exemptions for interest 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

• an individual or trustee of certain trusts, who is a partner or owner and holds, at all times in the income year, FIFs with a total cost of $50,000 or less.

You can find more information on the exclusions and the FIF rules at www.ird.govt.nz/toii/fif and in the Tax Information Bulletins (TIBs)—see the online index for relevant issues.

If at any time during the 2019 income year the partnership or LTC has attributed CFC income or loss, the partners or owner(s) may be required to calculate this in their own income tax return(s).

A loss from a CFC can’t be used to offset domestic income or be included in domestic losses that are carried forward to the 2019 income year. Generally, these losses can only offset income or future income from CFCs that are resident in the same country as the CFC that incurred the loss.

The partners or owner(s) may also need to file an additional CFC disclosure form. See Question 25 at IR7 Question 25 Additional disclosure of foreign investments.