The Russell McVeagh Tax team has made submissions to the Finance and Expenditure Committee on the Taxation (Annual Rates for 2025-26, Compliance Simplification, and Remedial Measures) Bill (the "Bill").
The Bill was introduced to Parliament on 26 August 2025. Please see a copy of our submissions and a copy of the Bill.
What's in the Bill?
The Bill contains a range of measures aimed at improving New Zealand's current tax settings, with a particular focus on simplifying compliance measures and ensuring that New Zealand remains an attractive destination for investment, skilled migrants and returning New Zealanders.
Proposals include the introduction of the "non-resident visitor" regime, changes to the foreign investment fund ("FIF") rules for recent migrants, amendments to the GST rules that apply to joint ventures and a new tax deferral regime for employees of unlisted companies who acquire shares through an employee share or option plan. The Bill also proposes a range of remedial measures throughout tax legislation.
Overview of our submissions
Our submissions broadly support these proposals, and our recommendations look to improve certainty, reduce compliance costs and ensure the rules operate cohesively alongside existing tax legislation.
In summary, our submissions and recommendations regarding the Bill are as follows.
Employee share and option plans
As we noted in our September update, the Bill has proposed some welcome changes that should ease the tax burdens that can arise for employees who receive benefits under certain workplace share or option plans. In brief, the proposals would allow employers that are unlisted companies to elect for tax to be paid at the time of certain "liquidity events", rather than when the employee receives shares under their plan.
We support these developments, and propose some refinements to this elective tax deferral regime. In our view the Bill could be amended to maximise flexibility to employers and employees, and ensure that the rules properly address the valuation and liquidity issues commonly faced by such companies and their employees.
New "non-resident visitor" regime
We support the proposed new rules aiming to ease the tax consequences for visitors to New Zealand who engage in remote work as "digital nomads" while in the country. Our submissions focus on the eligibility criteria for the rules.
We recommend that those criteria are amended for consistency with existing policy settings in the Income Tax Act 2007, to encourage visitors to New Zealand and ensure the regime is accessible to those who it is designed to attract. We raised concerns that one aspect of the new regime may unlawfully discriminate against foreign visitors (as compared to New Zealand citizens who visit while they are tax resident of another country). New Zealand has agreed in certain tax treaties not to discriminate against citizens from the treaty counterparty. It could be argued that an adverse tax result that applies if a "non-resident visitor" breaches their visa conditions discriminates against foreigners, because New Zealand citizens would not face the same adverse consequence.
Overall, we consider the new rules to be a welcome development to make New Zealand an attractive destination to work in, but technical amendments to the proposals could better meet the Bill's policy aims.
New FIF calculation method
New Zealand residents who hold shares in foreign companies may be subject to the FIF rules which tax those investments on an annual basis (often without receipt of corresponding cash flow). The FIF rules can make New Zealand an unattractive destination to migrate to, because the rules can result in significant compliance costs for taxpayers, require the payment of tax even when a company has not paid the shareholder cash and, for citizens of the United States, can make it difficult to claim a tax credit to avoid double taxation (when the United States taxes them on their worldwide income).
The Bill proposes a new calculation method for determining FIF income on a realisation basis that is applicable to certain types of FIF interests, and is available when an individual migrates to New Zealand or returns after an absence of 5 years.
We submitted that this method should also extend to all further acquisitions of shares of the same class in the same company after becoming a New Zealand tax resident. This would ensure that economically identical interests are treated equally under the FIF rules, and would avoid the compliance difficulty associated with applying different FIF calculation methods to identical shareholdings in the same company. Applying the new FIF method more broadly would also ease compliance for taxpayers acquiring shares through a dividend reinvestment plan.
GST and joint ventures
In our view, the Bill's amendments to the GST rules to address issues with unincorporated joint ventures are overly complex.
These rules were drafted on the basis of a perceived misapprehension about how the current GST provisions apply, and propose to change the "status quo" for how joint ventures are treated, with new elective rules applying to certain classifications of joint venture (and not to others).
We consider that these extensive changes are not in keeping with the Bill's aims to simplify compliance for taxpayers and we recommend a simpler, elective regime, through which joint ventures may elect for flow-through treatment. – for all non-electing joint ventures, we think it is simpler to maintain the status quo (treating the joint venture as a "company" for GST purposes).
Next steps
Public consultation on the Bill closed on Thursday 23 October 2025. Submissions will now be referred to the Finance and Expenditure Committee, and we look forward to reviewing how the Bill progresses through the Select Committee stage.
If you have any questions about the tax Bill, or how its proposals may affect you or your business, please reach out to one of our experts or your regular Russell McVeagh contact.