Tax Attack: What you should know about your US & NZ tax obligations

4 minute read


Love ’em or hate ’em (probably the latter), they’re an inevitable part of your obligations as a law abiding citizen of New Zealand. Dealing with taxes on your NZ investments is usually as easy as filling out your IR3 form with the right information, maybe with a little help from your accountant.

When it comes to taxes on your foreign investments, the IRD website can be rather...confusing. Trust us when we say it’s really not that complex. However, getting your tax right is your responsibility. Here's a quick run down on some of the key rules.

Tax 101

As a New Zealand tax resident, you pay tax on the total income you receive from all your investments, whether they're in NZ, the US, or elsewhere. Overseas investments include:

  • pension schemes

  • shares in foreign companies (like what you buy on Hatch)

  • rental properties in another country (not included in FIF rules)

  • bank accounts (not included in FIF rules)

If you’re a tax resident outside New Zealand you’ll need to consider the tax rules for every other country, including double tax agreements. As always, we recommend seeking professional tax advice.

Yes. Tax rules on foreign investments can actually be quite straightforward.

Many would have you believe that tax rules for foreign investments are too complicated, but the tax rules that apply to your first forays into international investing can actually be quite simple. So simple that you’ll be able to work out what you owe on your own in most cases, without even needing to consult an accountant.

That said, if you’re unsure about how to go about filling out your IR3 form or have any tax-related questions, seeking professional advice is definitely a good idea. Hatch will provide you with information at tax time, but complying with your tax obligations is your responsibility.

Easy-as overseas tax rules (for investments $50k or less)

If you who haven’t got more than $50,000 NZD invested overseas just yet, this simplifies things when it comes to NZ taxes.

As long as the total cost of all your overseas investments (excluding most Australian listed shares) doesn’t exceed $50,000 NZD for the whole tax year, paying tax on your Hatch investments is pretty simple:

In the US

First, the great US of A gets a cut... But the good news is you don’t need to lift a finger. With Hatch every part of your US tax requirements, from form filling to payment is automatically sorted for you.

DriveWealth (our US broking partner) uses the information you enter when you sign up to Hatch to complete and submit a W-8BEN form on your behalf, so your US withholding tax rate is usually reduced to 15%. US withholding tax is automatically deducted from your dividends and distributions before the money lands in your Hatch account.


If you are investing as an individual (i.e. not a trust), when it comes to NZ tax time, you’ll need to fill out an IR3 form (or get your accountant to). You’ll be taxed at your marginal income tax rate on the dividends you receive on your Hatch investments, but once again, there’s a silver lining. You’ll receive up to a maximum of 15% tax credit for the withholding tax you’ve already paid in the US so you’re not double taxed.

The IR3 form has an ‘Overseas income’ portion where you’ll put dividends from your Hatch investments and your 15% tax credit. We’ll give you the numbers you need to enter in both fields:


If you’ve made a profit from selling any shares, you shouldn’t need to pay tax on any gains, as long as you didn’t buy the shares for the purpose of selling them, aren’t in the business of buying such investments, aren’t a dealer in such investments and didn’t buy them as part of a profit-making scheme. This is a pretty sweet bonus, that has a flip side: you can’t claim any losses you make either.

FIF starter for ten (for investments over $50k)

If and when you’re ready to grow your overseas investment portfolio over $50,000 NZD, you’ll encounter a different set of NZ tax rules: the Foreign Investment Fund (FIF) rules. Generally, under these rules, individuals will be taxed on the lower result of two taxable income calculation methodologies. The equations are pretty straight forward, but the calculations can get a little complex. A professional tax advisor is the best way to ensure you stay in the clear with the tax man.

Option 1: Fair Dividend Rate (FDR method)

You’ll be taxed 5% of the entire market value of all your foreign shares on 1 April (including those not with Hatch).


5% of the entire value of all your foreign shares on 1 April
opening market value

the total of the market values of shares held at the beginning of the income year (1 April)
quick sale adjustment

an amount calculated when you buy and sell shares in the same company in the same income year

Option 2: Comparative Value (CV)

You’ll be taxed on the total return on your portfolio for the tax year (including any changes in its value). Any negative returns will be rounded to 0, so you won’t be able to carry losses forward.

(Closing value

Closing market value of your investments held at the end of the income tax year

Money received from selling investments (after expenses) + dividends you’ve received (before any tax withheld)
(Opening value

Opening market value of your investments held at the start of the income tax year

Money spent on buying investments (including the cost of buy brokerage)

Generally speaking, you can only use one of the methods for all your overseas investments each tax year.

The ‘Overseas income’ portion of your IR3 form is the place to enter your returns, regardless of the method you use to calculate them.


Panicking? Rest easy

Whether you’re part of the FIF rules or not, we’ll provide you with the information you need to fill out your IR3 here in New Zealand. Just a reminder that this isn’t advice, and we’re not tax advisers. At the end of the day, your tax obligations are your own and you need to understand them… but we’ll do what we can to help.

For more information on how Hatch deals with tax, get in touch and we’ll be happy to point you in the right direction.

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