Tax experts already see ways around new rules

Tax experts are already finding ways to avoid new tax rules on investments announced this week even before the rules come into force on April 1 next year.

Law firm Bell Gully in its newsletter to clients this week writes that it may be possible to structure investments to "limit the impact" of new rules that will impose a capital gains tax on investments outside New Zealand and Australia.

"For example, portfolio investors could pool offshore investments in a New Zealand holding company which would then invest in a controlled foreign company resident in a grey-list country," Bell Gully said.

The firm said that the "branch equivalent" method will continue to be available to investors as an alternative to the new rules.

Under this method, profit or loss in the foreign company is attribtuted to the investor in proportion to their interest in the company.

Although this method can be difficult for portfolio investors, as it requires detailed information about the foreign company in order to calculate the equivalent income or loss, investors using this method are not taxed on gains on the sale of their investments, the firm said.

- NZPA