Following criticism from tax and finance industry experts, New Zealand Finance Minister Michael Cullen and Revenue Minister Peter Dunne have...

Following criticism from tax and finance industry experts, New Zealand Finance Minister Michael Cullen and Revenue Minister Peter Dunne have unveiled a proposed way forward on offshore investment tax changes. The ministers said that they are proposing to apply a “fair dividend rate” to calculate tax on overseas shares. "This would tax individuals on a maximum of 5 per cent of the value of their offshore shares in a given year. However, unlike the proposal in the bill, where their shares have made a return in excess of 5 per cent, there would be no amount to carry forward as an excess gain (to be taxed in a later year). The fair dividend rate approach would not target capital gains, but rather something approximating a reasonable dividend yield," said the ministers. Individual investors would be able to pay tax on a fair rate lower than 5 per cent if they can show that their offshore portfolio share investments made a return of less than 5 per cent. Where an individual investor’s shares make a negative return, no tax would be payable.