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Certainty in the taxing of Collective Investment Schemes

25 February 2020
– 1 Minute Read


We are expecting to hear more in this year’s Budget Speech about changes to the taxation of collective investment schemes in securities (CIS) and their investors.  The current uncertainty regarding future tax treatment is not good for the industry or its investors. 

At the moment, CISs and their investors are taxed on a “flow through” principle, similar to how trusts are treated. 

In the 2018 Budget Speech, concerns were raised regarding the tax treatment of CISs and their investors.  Far-reaching amendments were proposed, with the most contentious being deemed income tax treatment for any financial instruments disposed of by the CIS within one year of acquisition, even if this was simply a portfolio balancing exercise (which in terms of “ordinary” tax rules, would be considered capital in nature).  However, as a result of industry submissions regarding the significant negative impact to the industry, the 2018 proposed amendments were withdrawn. 

In the 2019 Speech, the Minister of Finance mentioned that a study would be conducted to find a solution that would not have a negative impact on the industry.  The outcome of this study is anticipated to be incorporated into the 2020 tax amendments.  Industry participants and investors await these changes with trepidation.