Institute welcomes foreign investment fund compromise

"The New Zealand Institute of Chartered Accountants welcomes news that the Government is moving away from its position in a current tax bill on overseas taxation rules and towards a model that is based on a deemed rate of return," said Tax Director Craig Macalister.

"In our view the proposal in the bill had the potential to over-tax foreign-sourced income, and was very complex."

However, the Institute still has reservations on the risk-free rate of return method now under consideration, he said. "Conceptually the change is straightforward, but the changes may not address the concerns of complexity.

"The risk-free of return rules can become complex very quickly. Potentially they could end up looking like a cross between a space shuttle wiring diagram and something out of a Dr Seuss book," Mr Macalister said.

"On balance, we would prefer the status quo to remain."

Mr Macalister said that a risk-free rate of return approach will still impose a tax liability in years when investments are making losses. This was largely the reason why these proposals were not well favoured when originally floated, he said.

ENDS