Controlled Foreign Company (CFC) & Foreign Investment Fund (FIF)
CFC
A foreign company controlled by New Zealand residents (being controlled more than 40% by one New Zealand resident, or more than 50% by two to five New Zealand residents). Income is taxable in New Zealand if it is a type of “passive income” where this is equal to or more than 5% of total income earned by the CFC.
Non-portfolio FIF
A foreign company owned 10% or more that is not controlled by New Zealand residents. Taxed either as a CFC or as a portfolio FIF.
Portfolio FIF
A foreign company not controlled by New Zealand residents, a foreign superannuation scheme or foreign life insurance policy. An ownership interest of less than 10% is required.
Taxed using one of four methods:
- Fair dividend rate (FDR)
- Cost
- Comparative value (CV)
- Deemed rate of return (DRR)
A foreign superannuation scheme entered into by a non-resident is subject to separate rules when lump sum withdrawals are made from the scheme. Regular pensions and commutation payments are taxed as income.