Introduction and Scope
Part One of this series detailed how the proposed changes to N.Z.’s FIF rules[1] may affect N.Z. tax residents who are subject to tax of another country, notably the U.S., through citizenship, or lawful permanent residence[2].
Those individuals may elect the ‘extended RAM’ as explained in Part One.
The provisions discussed in this article will apply to the category of taxpayers who aren’t subject to tax in another country through citizenship, or lawful permanent residence of another country.
This category of taxpayers represents the greater population of N.Z. tax residents with interests in foreign companies. This is since all countries, except the United States and Eritrea, impose individual income tax on a residency basis. Thus, individuals from all other countries do not have ongoing tax obligations to any country based on residence, only income sourced from that country.
As with extended RAM taxpayers, RAM taxpayers need to have been non-resident of N.Z. for at least five years[3] prior to becoming N.Z. tax resident.
Revenue Account Method – new rules for non-U.S. citizens and individuals without lawful permanent residence of another country
The Revenue Account Method (RAM) will tax realized gains and losses, and dividends received from portfolio interests, in unlisted foreign corporations.
The calculation is the same as the extended RAM, albeit with a narrower scope of foreign shareholdings available for this method. In addition, due to the complications of obtaining market values for unlisted entities, additional rules are being introduced to address those issues for the RAM to be able to be applied effectively and efficiently by taxpayers who elect this method.
It follows that RAM taxpayers will receive less tax relief than extended RAM taxpayers, whose tax relief extends to shares in any foreign corporation subject to the FIF rules, whether listed, or unlisted[4].
Transactions taxable under the RAM will include:
- Dividends of shares in unlisted foreign companies.
- Gains and losses on disposal of shares in unlisted foreign companies.
The RAM will be available for shares that satisfy the following conditions.
- The company in which the shares are held is not listed on any stock exchange.
- No redemption facility for market value in respect of the share is available.
- The company in which the shares are held does not of its own accord hold 80% or more of its value in shares in any company which does not satisfy the two previous requirements.
- Any RAM election must be applied across all foreign shareholdings that are within the RAM category.
Cost base for the RAM calculation
The current proposal is the market value of the shares at the date on which the RAM is first applicable to the share. The valuation must be obtained by the later of 12 months from the date of acquisition, or when the FIF rules become applicable to the taxpayer, or the due date of the person’s first income tax return in which they apply the RAM.
Example: Obtaining market valuation
Lenna moved to New Zealand on 22 January 2022 and became a transitional resident. Her transitional resident status expires on 31 January 2026. After her transitional resident status expires, Lenna determines that the FIF rules apply, and she elects to apply the RAM.
Through electing the RAM, she needs to obtain the market value of all eligible shares as of 1 February 2026 or use a time-based apportionment method.
Lenna’s income tax return for the 2026 tax year is due by 7 July 2026. Twelve months from the date the FIF rules started applying to her would be 1 February 2027. Therefore, Lenna needs to obtain a market valuation for all relevant shares by 31 January 2027.
If Lenna’s income tax return is due by 31 March 2027, because she has engaged a tax agent to file her return for her, then that is the date by which Lenna needs to obtain a market valuation for all relevant shares.
In either case, it is the market value of all eligible shares as of 1 February 2026 that Lenna needs to obtain. (example sourced from the bill commentary on the Taxation (Annual Rates for 2025–26, Compliance Simplification, and Remedial Measures) Bill, passed on 26 August 2025).
Alternative valuation method: time-based apportionment
If the only way to obtain a valuation is through an independent valuation, an alternative valuation method can be used. This is an apportionment of the total holding period over the days spent in N.Z. as a full tax resident.
Example: Time-based apportionment method
Phil, a Swedish citizen living in Sweden, acquires a 1% shareholding in an unlisted Swedish company on 15 June 2015. The equivalent purchase price in NZ dollars is NZ$100,000.
On 23 August 2023 he moves to New Zealand and becomes a transitional resident, which expires on 31 August 2027. Once his transitional resident status expires, he becomes taxable on his worldwide income. The FIF rules start to apply to his foreign shares.
Phil elects the RAM to calculate N.Z. income tax.
The value of the shares is not readily available, and obtaining an independent valuation is not an efficient way of determining a value to assign to the shares.
Phil therefore chooses not to obtain an independent valuation.
On 29 October 2029, he sells those shares and derives the equivalent of NZ$200,000.
Phil’s total gain on the sale of the shares is NZ$100,000.
The total number of days he has owned the shares is 5,250 (15 June 2015 to 29 October 2029).
The total number of days Phil was a resident in New Zealand, excluding days spent as a transitional resident, is 789 (1 September 2027 to 29 October 2029).
The total amount of the gain attributable to New Zealand is calculated as follows.
net gain ($100,000) x period of ownership while New Zealand resident (789)/
total period of ownership (5,250)
=
$15,028
x
0.7
=
$10,520
Phil will include FIF income on the Swedish shares of $10,250 for the year ended 31 March 2030.
As explained in this article, the RAM is only available to individuals who are not subject to taxation in another country through citizenship or permanent residency.
Whilst Part Two of this article explains the extended RAM for individuals who are subject to taxation in another country through citizenship or permanent residence it follows that extended RAM taxpayers who have foreign shares, subject to FIF taxation, in unlisted companies, will need to adopt the principles for valuation contained in this part the series.
Extended RAM taxpayers therefore can use either the market value method or the time-based apportionment method, as explained above, to value unlisted shares that are subject to the FIF rules.
This concludes Part Two of the series of changes to the FIF rules. Part Three will address the interrelationship between RAM, extended RAM, treatment of losses and other scenarios, and losses.
Disclaimer:
The information provided in this blog post reflects current tax laws and regulations as of the date of publication. Any references to proposed rules or legislative changes are for informational purposes only and do not represent final or enacted law. These proposals are subject to change and may not be implemented in their current form. Readers should consult with a qualified tax professional or monitor official IRD guidance for updates before making any financial or tax-related decisions.
[1] Per the Taxation (Annual Rates for 2025–26, Compliance Simplification, and Remedial Measures) Bill, passed on 26 August 2025.
[2] “Green card holders”.
[3] The five-year look-back period includes the transitional residence period. The start date for the retroactive five-year count is the date an individual becomes subject to N.Z. tax on worldwide assets.
[4] Still subject to existing Category One FIF rules.
