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