Transitional residents (essentially new residents to New Zealand) are given a four-year exemption on their foreign-sourced investment income. Their New Zealand-sourced investment income is fully taxed from day one.
So, if a transitional resident invests in a foreign investment PIE that derives New Zealand-sourced income, the PIE should pay tax for the transitional resident on the basis they are a New Zealand resident. This includes an investment in a foreign investment variable-rate PIE.
However, where a transitional resident invests into a foreign investment zero-rate PIE they will only derive offshore income and the transitional resident should be able to use the zero-rate prescribed investor rate for this income.
Transitional residents that cease to be eligible for the zero rate can continue to use the zero rate until the beginning of the next tax year.
Date published: 30 Aug 2011