FDR
Fair Dividend Rate (FDR)
The default Foreign Investment Fund calculation method for most foreign shares — taxes a deemed 5% return on the opening market value of the FIF interest, regardless of actual gain or loss.
The Fair Dividend Rate (FDR) is one of four prescribed methods under New Zealand's Foreign Investment Fund (FIF) rules. It is the default for most foreign shares held above the NZ$50,000 cost-basis de minimis threshold. FDR deems a 5% return on the opening market value of the FIF interest for the year and taxes that deemed amount at the investor's marginal rate.
FDR has two practical features. First, it is unaffected by realised gains: the investor pays tax on 5% of the opening-year value whether the shares went up 30% or fell 20%. Second, in a loss year an individual can elect the Comparative Value (CV) method instead on an interest-by-interest basis — the "lower of FDR or CV" rule — provided market values are available.
Inside a NZ PIE, FDR is applied at the fund level on the PIE's foreign holdings. The resulting income flows into the PIE's taxable income and is taxed at the investor's PIR, capped at 28%. The investor does not separately apply FDR to their PIE units.
Primary sources
Related terms
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FIF rules
Foreign Investment Fund (FIF)
A New Zealand tax regime that taxes NZ-resident individuals on the holding of most foreign shares and non-PIE foreign funds above a NZ$50,000 cost-basis de minimis threshold.
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PIR
Prescribed Investor Rate (PIR)
The tax rate applied to your share of a PIE fund's taxable income. NZ has three PIRs for resident individuals — 10.5%, 17.5% and 28% — chosen using a two-year look-back of taxable + PIE income.
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PIE fund · PIE
Portfolio Investment Entity (PIE)
A tax-efficient New Zealand fund structure where investor tax is capped at the investor's Prescribed Investor Rate (PIR), with a maximum of 28%.