Executive summary

On 10 September 2026, the New Zealand Government introduced the Taxation (Annual Rates for 2026-27, FBT Simplification, Foreign Investment Funds, and Remedial Measures) Bill (the Bill). The Bill proposes targeted reforms intended to improve New Zealand's attractiveness for capital and talent, reduce selected compliance costs and maintain tax-base integrity. Proposed changes include:

• Amendments to the financial arrangements rules intended to reduce the tax impact of foreign-exchange movements and help alleviate tax barriers for those migrating to New Zealand
• Reform of the foreign investment fund (FIF) rules, including an increased de minimis exemption threshold for determining who falls outside the rules and an expanded optional realization-based revenue account method to apply beyond recent migrants
• Updates to the nonresident contractors tax (NRCT) regime to modernize the rules and reduce tax barriers to cross-border services
• Other measures affecting businesses and investors, including a new tax regime for certain crypto asset-lending transactions, simplification of the approved issuer levy (AIL) regime and repeal of the income tax exemption for nonresident charities

Detailed discussion

Changes to financial arrangements rules to benefit new migrants

Recognizing that migrants and internationally mobile individuals often retain borrowing and other arrangements in foreign currencies, the Bill proposes targeted amendments to New Zealand's financial arrangements rules. The changes are intended to reduce complexity and uncertainty associated with the taxation of foreign-currency financial arrangements. Although the proposals are not limited to new migrants, reducing tax barriers for individuals relocating to New Zealand is a key driver of the reforms. Under the current rules, taxpayers may be required to recognize foreign-exchange gains or losses on loans and similar instruments before any cash gain or loss is realized.

Key proposed changes include:

• The impact of exchange rate movements for foreign-currency financial arrangements would be reduced by allowing eligible taxpayers to calculate net income in a foreign currency, subject to integrity rules.
• Safeguards against double taxation would be provided, particularly for citizens of the United States, to address situations in which individuals taxed in another country on a citizenship basis may otherwise face double taxation due to differences in the timing of income recognition under New Zealand's financial arrangements rules and the tax rules of the other jurisdiction.
• A new valuation rule to help prevent unexpected tax liabilities for Active Investor Plus visa holders would apply in relation to certain New Zealand-dollar-denominated arrangements acquired to meet the visa requirements.
• Certain low-risk foreign-currency arrangements, such as personal bank accounts and private loans, would be removed from the rules altogether.

The changes would generally apply from 1 April 2027 for the 2027—2028 and later income years, with the Active Investor Plus visa proposal applying from 1 April 2025.

Amendments to FIF rules to reduce tax barriers and complexity for offshore investments

The Bill includes a package of proposed changes to the FIF rules that may be of particular interest to migrants, internationally mobile individuals and other taxpayers with offshore investments. The proposals are intended to reduce compliance costs and tax barriers associated with investing outside New Zealand.

Key proposals include:

• The de minimis threshold would be increased from NZ$50,000 to NZ$100,000, reducing the number of taxpayers required to apply the FIF rules to their foreign-share investments.
• Access to the optional realization-based revenue account method (RAM) for calculating FIF income would be expanded from recent migrants to all eligible individual New Zealand tax residents. Broadly, the RAM allows qualifying foreign shares to be taxed on a realization basis, rather than under the standard FIF calculation methods.

For information on the existing RAM, see EY Global Tax Alert, New Zealand enacts changes to support foreign investment in infrastructure and ease tax obligations for new migrants and remote workers, dated 1 April 2026.

Additional technical amendments are also proposed, including changes to expand access to the attributable FIF income method for certain taxpayers and to clarify eligibility for the 10-year FIF exemption in cases of corporate migration. The changes would apply from 1 April 2026 for the 2026—2027 and later income years.

Updates to NRCT regime aimed at reducing compliance costs for cross-border services

The NRCT regime requires tax to be withheld from certain payments to overseas service providers to help ensure they meet their New Zealand tax obligations. The Bill proposes several changes intended to modernize the regime and reduce compliance costs associated with cross-border business activities.

Key proposals include:

• Increasing the exemption threshold from NZ$15,000 to NZ$75,000, allowing more small contracts performed by nonresident contractors in New Zealand to fall outside the regime
• Simplifying how the threshold exemption tests are applied, so New Zealand entities generally only need to consider their own contracts with a nonresident contractor when determining whether a threshold exemption applies
• Removing NRCT for certain low-risk entities with good compliance history, including branches, limited partnerships and representative offices

The reforms would apply from 1 April 2027. Collectively, the changes are intended to reduce barriers to cross-border services by alleviating withholding tax obligations for lower-risk or smaller engagements, while retaining safeguards to protect the New Zealand tax base.

Additional tax measures of interest to businesses and investors

A new tax regime for certain crypto asset-lending transactions would apply from 1 April 2027. Modeled on New Zealand's existing share-lending rules, the proposed regime is aimed at taxing qualifying arrangements according to their economic substance (a loan) rather than their legal form, thereby reducing tax consequences that could otherwise arise from the disposal and subsequent reacquisition of equivalent crypto assets.

The AIL regime, which allows eligible New Zealand resident borrowers to pay a 2% levy on interest paid to nonresident lenders instead of applying nonresident withholding tax, would be simplified. Specifically, the threshold for reduced AIL filing frequency would be adjusted effective from 1 April 2027, and a new integrity measure would be introduced for securities registered on or after 1 October 2027.

Changes to the research and development tax incentive (RDTI) regime from the 2027—2028 income year would allow businesses to receive quarterly payments based on expected RDTI credits, rather than having to wait for the annual payment cycle. In addition, the annual cap for internal software research and development expenditure would be reduced from NZ$25m to NZ$3m.

The fringe benefit tax rules for motor vehicles would be amended from 1 April 2027. The current requirement to track vehicle availability for employee private use would be replaced with a category-based framework, intended to reduce compliance costs for employers.

Other noteworthy proposals include:

• The income tax exemption for New Zealand-sourced nonbusiness income derived by nonresident charities would be repealed from 1 April 2028.
• Remedial changes would be made to New Zealand's global anti-base erosion (GloBE) rules to address technical issues identified since enactment of the rules.
• The thin-capitalization rules for foreign-owned banks would be modified from 1 April 2027.

Implications

The Bill is expected to be enacted by 1 April 2027, although the proposals may change during the parliamentary process.

Many of the proposed measures are intended to reduce tax barriers, compliance costs and complexity for migrants, internationally mobile individuals, investors and businesses engaged in cross-border activities. Affected taxpayers should assess the potential implications for their existing arrangements and future investment, financing and business activities.