Executive summary

On 30 March 2026, the New Zealand Government enacted the Taxation (Annual Rates for 2025-26, Compliance Simplification, and Remedial Measures) Act 2026 (the Act). The Act contains amendments aimed at boosting the New Zealand economy, supporting foreign investment in New Zealand infrastructure and easing tax obligations for new migrants and remote workers. A wide array of changes in the Act includes amendments to:

• Thin-capitalization settings for infrastructure investment
• The FIF regime, with the changes predominantly affecting new migrants
• Tax settings for "nonresident visitors" working remotely for offshore employers
• New Zealand tax obligations for foreign employers of nonresident visitors
• The timing of taxation for certain employee-share schemes

Detailed discussion

The Act was first introduced as draft legislation on 26 August 2025. (For an overview of the key amendments as initially proposed in the draft legislation, see EY Global Tax Alert, New Zealand eases tax rules for migrants and remote workers, dated 28 August 2025.)

After undergoing some changes during the parliamentary process, the draft legislation received Royal assent on 30 March 2026. The Act contains a wide array of changes. Several of the key changes are outlined below.

Thin-capitalization settings for infrastructure investment

The Act includes changes to New Zealand's thin-capitalization settings to better accommodate qualifying foreign investment in New Zealand infrastructure. The changes apply from the 2026−2027 income year.

A new elective rule allows an "eligible infrastructure entity" to deduct interest on qualifying debt without a thin-capitalization income adjustment. The exemption applies only to genuine third-party debt for which the lender's recourse is limited to the assets and income of the infrastructure entity. Both new infrastructure projects and existing infrastructure businesses may be able to quality for the exemption.

Broadly, to qualify, the entity must:

• Be a New Zealand company controlled by a foreign investor or a foreign company operating in New Zealand through a partnership or fixed establishment
• Carry on a business or project that primarily involves creating, operating, maintaining or upgrading "qualifying infrastructure assets" in New Zealand
• Own assets that are entirely, or almost entirely, attributable to those activities
• Not have foreign operations or investments, subject to limited exceptions

The definition of "qualifying infrastructure asset" contains a non-exhaustive list focusing on tangible assets located in New Zealand that provide essential services. The list offers examples of qualifying infrastructure assets by type: transport, energy, water, telecommunications, waste and social infrastructure.

These changes are likely to be well received by affected taxpayers.

Changes to the FIF regime

The Act includes a new optional "revenue account method" that allows eligible taxpayers to calculate the FIF income of certain foreign investments on a realization basis. Under the new method, New Zealand tax applies only to dividends received and a proportion of realized gains or losses on disposal.

These amendments apply from 1 April 2025 to individuals who became tax resident in New Zealand on or after 1 April 2024. The person must have been a nonresident for at least five years before becoming New Zealand tax resident. Transitional residents and family trusts may also be eligible in some cases.

The revenue account method is broadly available in relation to:

• Unlisted shares in a foreign company that were acquired before the person became New Zealand tax resident
• All foreign shares on which the person is concurrently liable for tax in another country upon the disposal of the shares due to their citizenship or right to work and live in that country, provided New Zealand has a tax treaty with the other country

Several other eligibility criteria and requirements apply, and specific rules cover circumstances in which the individual has multiple entry and exit points — including rules that, in some cases, apply a deemed disposal. Specific rules also govern the interaction of the revenue account method with other FIF calculation methods.

The changes are aimed at ensuring the FIF rules do not act as a deterrent to migrants choosing to settle in New Zealand. The new method will provide welcome relief for some migrants, particularly those subject to citizenship-based taxation (such as citizens of the United States).

Tax treatment of visitors to New Zealand

Several amendments allow overseas visitors working remotely for offshore employers to stay longer in New Zealand before triggering certain tax obligations. The changes apply to a person who commences a visit to New Zealand on or after 1 April 2026. Key aspects include:

• Eligible nonresident visitors are deemed to be nonresident for New Zealand tax purposes for up to 275 days in any 18-month period.
• This new rule allows visitors to work for their offshore employers; however, visitors cannot undertake work for New Zealand residents or work that requires physical presence in New Zealand and cannot sell any goods or services to New Zealand customers.
• Certain employment and professional services income earned by nonresident visitors is exempted if the services are performed for a nonresident; other New Zealand-sourced income remains subject to existing New Zealand tax rules.
• The activities of a nonresident visitor are disregarded when determining corporate tax residence of a foreign employer or associated entities (including under center of management, director control and head office tests), and when assessing whether a nonresident enterprise has established a permanent establishment in New Zealand. (Inland Revenue explains the tests here.)
• For visitors who remain lawfully in New Zealand beyond 275 days, existing New Zealand tax-residence rules apply prospectively from the date the visitor ceases to qualify as a nonresident visitor. Retrospective residence will arise for unlawful overstayers; however, the loss of tax concessions for a foreign employer will apply on a prospective basis only.

In an increasingly mobile working world, these reforms should help provide certainty for visitors and their employers.

Other changes

The Act includes several other reforms, including in relation to:

• Employee-share schemes: From 1 April 2026, unlisted companies can elect into a regime in which employees who receive shares as part of an employee-share scheme can defer their tax liability until a liquidity event occurs when the shares can be more easily valued and sold. Deferral applies to both resulting income for the employee and to the deduction claimed by the employer. This change is intended to help the start-up sector, including overseas companies, attract and retain talent.
• Goods and Services Tax (GST) and unincorporated joint ventures: Members of a joint venture can choose to individually account for GST on supplies made or received in the course of the venture, rather than having to register the venture separately, which could affect overseas joint venture participants.
• Global Anti-Base Erosion (GloBE) rules: A remedial amendment helps ensure that New Zealand's GloBE rules correctly incorporate Organisation for Economic Co-operation and Development (OECD) guidance published on 5 January 2026, which simplifies the GloBE rules and establishes a side-by-side system. (For background, see EY Global Tax Alert, OECD releases Side-by-Side Package on Pillar Two Global Minimum Tax: Detailed review, dated 16 January 2026.) Without this change, certain multinational enterprises (MNEs) would not benefit from the OECD guidance until a later time than intended. This amendment applies from 26 December 2025 and is important for large MNEs within scope of Pillar Two.

Implications

The changes will be welcome news for many. It is positive that both new infrastructure projects and existing infrastructure businesses may be able to quality for the new targeted exemption for infrastructure investment. For eligible new migrants to New Zealand, the new revenue account method will relieve cashflow concerns imposed by the current FIF regime. In addition, offshore employers looking to allow flexible working arrangements for their staff will be pleased to see the new nonresident visitor rules.

Now that the changes are enacted, Inland Revenue will begin establishing the necessary administrative processes to facilitate compliance. This will include the publication of Inland Revenue guidance to help taxpayers understand the key changes.