New Zealand's Tax Reform Aims to Attract Global Talent and Investment

Edited by: Elena Weismann

New Zealand is implementing significant tax reforms to attract skilled migrants and investors, with a key focus on overhauling the Foreign Investment Fund (FIF) rules. The proposed changes aim to reduce the tax burden on unrealized capital gains, thereby creating a more welcoming environment for international talent and capital.

The core of the reform, expected to be included in a tax bill around August 2025, introduces a "revenue account method." This new approach will tax FIFs based on dividends received and 70% of realized capital gains, a shift from the current system that taxes unrealized gains. This adjustment is a direct response to criticisms that existing FIF rules have deterred individuals, particularly in the tech and startup sectors, who often hold valuable foreign equity.

Revenue Minister Simon Watts has been a strong advocate for these changes, stating that the current FIF regulations are a significant obstacle for both new migrants and returning New Zealanders. "The current foreign investment fund (FIF) rules are a key deterrent for migrants and returning Kiwis, especially in the tech or start-up sector from coming to and staying in New Zealand," Watts said. The government intends to act swiftly to remove these barriers and encourage greater investment.

These reforms align with New Zealand's broader economic strategy, "Going For Growth," which prioritizes talent development, global trade and investment promotion, and fostering innovation. By making the tax system more equitable and attractive, the government aims to stimulate economic growth, create more job opportunities, and increase wages for all New Zealanders. The reforms are designed to position New Zealand as a preferred destination for talented individuals and investors.

While the proposed changes are largely viewed positively, some commentary suggests that the tax rate on realized capital gains, potentially up to 39%, might still be considered high compared to international benchmarks. However, the introduction of the revenue account method, which allows for realization-based taxation and the potential to offset losses, is expected to provide considerable relief. The government is also exploring further adjustments to FIF rules and related international tax settings to enhance the nation's appeal. These efforts are part of a concerted strategy to position New Zealand as a globally competitive and attractive destination, harnessing the dynamism that skilled migrants and investors bring to foster a more robust and prosperous economy. The Taxation (Annual Rates for 2025-26, Compliance Simplification, and Remedial Matters) Bill, introduced in August 2025, contains these proposed changes, with the revenue account method intended to apply from April 1, 2025.

Sources

  • NewstalkZB

  • STEP

  • BusinessDesk

  • Dentons

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