Editing Openai/693cbf4b-55bc-8002-9fea-d4feddfd1f55 (section)

==== 3. US withholding tax does not offset FIF tax ====

This part is flatly incorrect:

: “since I have already paid $19,500 WHT, can it be used to offset the $7,500 FIF income tax”

No. It cannot.

Why:
* Foreign tax credits are only allowed where the foreign tax is paid on the same income that NZ is taxing
* Under FDR, NZ is taxing a deemed 5% return, not the dividend
* The US withholding tax is paid on actual distributions
* IRD treats these as different income bases

So:
* The $19,500 WHT is effectively stranded
* It cannot be credited against FIF tax
* You still pay the full $7,500 in NZ

This is one of the most common (and expensive) misunderstandings with high-yield offshore ETFs.