New Zealand

KiwiSaver is a work-based retirement savings scheme run by independent providers.¹ Employers must pay a compulsory contribution for each employee member aged 16 or over and under 65 whose own contributions are deducted from pay, other than a member of a defined benefit scheme:^2,3 3.5% of gross pay from 1 April 2026 (3% before, and 16 and 17-year-olds included only from then), rising to 4% from 1 April 2028.^4,5,6 Employee members pay in 3.5%, 4%, 6%, 8%, or 10% of their pay, as they choose; a new employee is enrolled automatically but may opt out in the first weeks of the job, and a member may apply for a savings suspension.^7,8,9

The government adds 25 cents for each dollar a member contributes, up to NZ$260.72 a year, unless the member's taxable income is over NZ$180,000.^10,11 Any New Zealand citizen or permanent resident living or normally living in New Zealand may join, including the self-employed and people not working,¹² and members and others may pay into an account at any time.^13,14,15,16 So the employer pays in, the member pays in, and so do the government and anyone else who chooses to.

A foreign trust.

Every KiwiSaver scheme must be a trust established and governed by a trust deed under New Zealand law, and its custodian holds the scheme property on trust,^17,18,19 which is what makes an arrangement a trust for U.S. purposes: trustees holding property to protect or conserve it for the beneficiaries.²⁰ A trust is domestic only if a U.S. court can exercise primary supervision over it and U.S. persons control its substantial decisions. A scheme governed by New Zealand law and run in New Zealand meets neither test, so it is foreign.^21,22

No IRS guidance addresses KiwiSaver's classification, and its legal form is the same as an ordinary managed fund's: a scheme in which people contribute money for returns produced by someone else's efforts.²³ An investment trust whose manager can vary its investments is not classified as a trust,²⁴ but we read KiwiSaver as one. The law fixes its purpose as providing retirement benefits, locks members' savings in until retirement age, and bars assigning or charging them,^25,26,27 and those are features of the funds the IRS has ruled privately are trusts, one of them a fund whose members chose their own investments.^28,29

We read the employer-paid part as a §402(b) employees' trust.

No IRS ruling addresses KiwiSaver, though the IRS has ruled privately that a similar foreign fund, with mandatory employer contributions and personal accounts, is a §402(b) trust.³⁰ We read the employer-paid part as a §402(b) employees' trust: the compulsory employer contribution is a contribution by an employer to a trust for its employees,² and a trust created outside the United States cannot be exempt under U.S. §501(a).³¹

On that reading, employer contributions are U.S. income to you in the year they are paid, to the extent they are vested,^32,33 and the foreign earned income exclusion cannot cover them.³⁴ You are not treated as owner of the part they fund.³⁵ We read your own contributions as made at your election, since you choose the rate and could opt out or suspend them,^7,8,9 and the IRS's reading of a similar fund treats amounts paid in at the employee's election as the employee's own, taxed as pay.³⁶ The U.S. rules for §401(k) plans, which do not govern a foreign plan, point the same way by analogy: automatic enrollment with a right to opt out still counts as an election,³⁷ though a one-time choice made on first becoming eligible that can never be changed does not;³⁸ KiwiSaver contributions can be suspended after 12 months, so they are not that kind of choice.⁹ Once your own contributions have come to exceed your employer's, you are treated as owner of the part your contributions fund.³⁹ Unless your employer taxes its contribution as your salary under the PAYE rules, the contribution reaches the scheme net of employer superannuation contribution tax (ESCT), at a rate set by your earnings,^40,41 and we count it as the scheme receives it. So if you pay in at the same rate as your employer, your contributions exceed your employer's from your first payday, and you are treated as owner of the part they fund from then on. No contribution to a §402(b) trust is a Part I event, your own included.⁴² Payouts are taxed under §72 when they are paid or made available to you,^43,44 and an amount you could withdraw just by asking counts as made available, which for KiwiSaver is the whole account from the New Zealand superannuation age;^45,46 they stay off Part III if you report them as compensation income,^47,48 unlike payouts from a part you own.⁴⁹

The government contribution comes from neither you nor your employer, so §402(b)(1), which reaches only an employer's contributions, does not cover it,³² and no IRS guidance addresses it or any other foreign government's contribution. The stronger reading is that it counts as your own contribution: New Zealand law makes it your tax credit, which as first enacted could be paid to you or your estate in some cases;^50,51 and someone who funds a trust on another person's behalf makes both of them grantors.⁵² On that reading it counts with your own contributions when they are compared with your employer's, and it is likely income to you when it is paid in: the IRS treats a government program's payments as income unless an exclusion applies, judged under U.S. law, and the welfare exclusion needs a payment based on need,⁵³ which this one, open to anyone earning NZ$180,000 or less, is not.¹¹ The other reading, that the government is the contributor, would leave it out of the comparison and tax it only when paid out; when the United States made its own government match, the Saver's Match, it treated the match as the saver's contribution but as pre-tax money, not income when contributed and taxed when paid out.^54,55 It is not settled. If you include it in your income for the year it is paid in, it is your basis; if you don't, it is taxed when it is paid out, so it is taxed once either way.⁵⁶

If you are a highly compensated employee and one reason the scheme is not exempt is that it fails the U.S. coverage tests, you include your vested balance, less what has already been taxed to you, in income each year instead.⁵⁷

Rev. Proc. 2020-17: unlikely. The proposed regulations: possible, with open questions.

Rev. Proc. 2020-17 exempts an eligible individual (one who has filed U.S. returns and reported the scheme's income as U.S. law requires)⁵⁸ from Forms 3520 and 3520-A for a retirement trust that meets its conditions.⁵⁹ KiwiSaver meets or points toward four of them. It is tax-favored: contributions earn the government contribution, which arises from a tax credit, and Rev. Proc. 2020-17 counts contributions that give rise to a tax credit or a government contribution.^60,50 Employers pay KiwiSaver deductions and employer contributions to Inland Revenue with payroll, and Inland Revenue works out each resident member's tax on scheme income at year end, which points to meeting the reporting condition.^61,62,63 Withdrawals wait until the New Zealand superannuation age, apart from first-home, death, hardship, serious-illness, and emigration withdrawals;^26,64 Rev. Proc. 2020-17 accepts withdrawals for hardship and buying a home, but moving abroad is not among its examples.⁶⁵ And every employee member gets the compulsory employer contribution, which points to meeting the employer-plan condition.^66,2

Two conditions are not met on the face of New Zealand law. Condition (3) permits only contributions from earned income,⁶⁷ but any New Zealand citizen or resident living there may join, including people not working, and anyone may pay into a member's account.^13,14,15 Condition (4) needs contributions limited to a percentage of earned income, US$50,000 a year, or US$1,000,000 for life;⁶⁸ members may pay in voluntarily at any time, and the KiwiSaver Act sets no limit on those payments.¹⁶ With no IRS guidance on KiwiSaver, Rev. Proc. 2020-17 is unlikely to cover it.

The proposed regulations, which you may rely on now if you apply them in full and consistently with related persons,⁶⁹ loosen both conditions. Contributions need only “generally” come from earned income,⁷⁰ and a scheme qualifies without a contribution limit if your schemes in New Zealand together stay at or under US$600,000 at every point in the year (adjusted for inflation from 2026).⁷¹ Every condition must be “established by the laws” of the scheme's country, and New Zealand law sets no limit on a balance,⁷² but the preamble ties the value test to the Form 8938 thresholds, which measure an account's actual value.⁷³ We read it as the actual value, and the app's exemption check asks it that way. Whether “generally” covers KiwiSaver's open contributions is not settled.

No deferral, and no effect on reporting.

The U.S.–New Zealand treaty does not defer U.S. tax on a scheme's earnings or exclude contributions. Its pension article covers pensions, annuities, and social security payments once paid.⁷⁴ For a U.S. citizen or resident, the saving clause leaves the United States free to tax as if the treaty did not apply, and of the pension article it keeps only the rule for social security payments.^75,76 There is no treaty position to claim. Even where a treaty does defer tax, the IRS has said Forms 3520 and 3520-A still apply.⁷⁷

Part II and Form 3520-A each year for the part your own money funds, usually from your first payday because of ESCT.

Read as a §402(b) trust: no Part I for any contribution.⁴² No Part II or Form 3520-A for the employer-funded part; once your own contributions exceed your employer's, Part II and Form 3520-A each year for the part they fund.^35,39,78 At the same rate as your employer, that is usually from your first payday, because ESCT comes off your employer's contribution before it reaches the scheme.⁴⁰ No Part III for payouts from the employer-funded part that you report as compensation income;⁴⁷ payouts from a part you own go on Part III, lines 24 and 27.⁴⁹ No Form 4970: payouts from a §402(b) trust are taxed under §72, not under the trust distribution rules, and the income of a part you own is taxed to you each year.^43,79,80

A member whose employer never pays in, such as a self-employed member, funds the whole account, so it is reported as a personal superannuation scheme (below). If the scheme is not treated as a §402(b) trust, each contribution you make is a Part I transfer and you are treated as owner of the part it funds, so Part I, Part II, Form 3520-A, and Part III all apply.^81,82,78,83 Either way, an eligible individual whose scheme qualifies under Rev. Proc. 2020-17 or the proposed regulations files none of them.^59,69 FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^84,85

Outside KiwiSaver, an employer's scheme is registered either as a workplace savings scheme, which provides retirement benefits and benefits on leaving the employer, or as a superannuation scheme, which is either a defined benefit scheme or one that allocates contributions to each member.^86,87 An employer may pay its compulsory contribution into a complying superannuation fund instead of a KiwiSaver scheme.⁸⁸

A foreign trust.

Every workplace savings scheme and superannuation scheme must be a trust established and governed by a trust deed under New Zealand law.^86,89,20 Governed by New Zealand law and run in New Zealand, it meets neither test for a domestic trust.^21,22

The employer-paid part reads as a §402(b) employees' trust, as for KiwiSaver.

Where the employer pays in, read the employer-paid part as a §402(b) employees' trust, as in the KiwiSaver block above: employer contributions are U.S. income when paid, to the extent vested, and you are not treated as owner of the part they fund;^32,33,35 once your own contributions exceed your employer's, you are treated as owner of the part yours fund.³⁹ No contribution is a Part I event,⁴² and payouts are taxed under §72.⁴³ No IRS guidance addresses New Zealand workplace schemes.

It turns on each scheme's trust deed; no IRS guidance.

Rev. Proc. 2020-17 turns on each scheme's rules.⁵⁹ A workplace savings scheme pays benefits on leaving the employer, not only at a retirement age,⁸⁶ so condition (5) is met only if those payments carry penalties.⁶⁵ A superannuation scheme must restrict withdrawals to those the superannuation scheme rules in the regulations permit,⁹⁰ so condition (5) turns on those rules. Conditions (3) and (4) turn on whether the trust deed takes contributions only from earned income and limits them.^67,68 The proposed regulations may help where your schemes in New Zealand stay at or under the value threshold.^71,69

No deferral, and no effect on reporting.

Same as KiwiSaver: no deferral, and no effect on reporting.^74,75,77

As for KiwiSaver, on the §402(b) reading.

No Part I;⁴² Part II and Form 3520-A only for a part your own contributions fund;^39,78 no Part III for payouts from the employer-funded part that you report as compensation income;⁴⁷ payouts from a part you own go on Part III, lines 24 and 27;⁴⁹ and no Form 4970, because payouts are taxed under §72.^43,79 An eligible individual whose scheme qualifies under Rev. Proc. 2020-17 or the proposed regulations files none of them.^59,69 FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^84,85

Individuals can join a superannuation scheme directly, outside an employer: the scheme must provide retirement benefits and may admit individuals as members.⁸⁹ A KiwiSaver account that no employer pays into, such as a self-employed member's, is funded the same way: by the member and anyone else who chooses to pay in.^14,15

A foreign trust.

A superannuation scheme, like a KiwiSaver scheme, must be a trust established and governed by a trust deed under New Zealand law.^89,17,20 It meets neither test for a domestic trust.^21,22

Does not apply where no employer pays in.

§402(b) reaches only an employer's contributions to an employees' trust,³² so it does not apply to a scheme only you pay into.

Rev. Proc. 2020-17: unlikely for a scheme open to any contribution. The proposed regulations: possible under the value test.

Rev. Proc. 2020-17 needs contributions only from earned income, limited by a percentage of earned income or a dollar cap, and withdrawals tied to retirement, disability, or death or penalized before them.^67,68,65 A scheme that takes any contribution at any time, as KiwiSaver does, is unlikely to qualify.¹⁶ The employer-plan condition does not apply to a scheme no employer maintains.⁶⁶ The proposed regulations may cover a scheme whose value stays at or under the threshold, with the same open questions as KiwiSaver.^71,69

No deferral, and no effect on reporting.

Same as KiwiSaver: no deferral, and no effect on reporting.^74,75,77

Full reporting for a scheme only you pay into.

Each contribution is a Part I transfer, and you are treated as owner of the part it funds,^81,82 so Part II and Form 3520-A are due each year,⁷⁸ and payouts go on Part III.⁸³ If the scheme does not file Form 3520-A, you attach a substitute to your Form 3520.⁹¹ No Form 4970, because the income is taxed to you each year.⁸⁰ An eligible individual whose scheme qualifies under Rev. Proc. 2020-17 or the proposed regulations files none of these.^59,69 FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^84,85

A trust set up under New Zealand law, during someone's life or by their will, in which a trustee holds investments or a business for family members.²⁰ If the trustee mainly runs a business for profit rather than holding property for the family, U.S. law may classify the arrangement as a business entity rather than a trust.⁹²

Usually a foreign trust.

Usually an ordinary trust, because the trustee holds property for the beneficiaries,²⁰ and a foreign trust, because it is governed by New Zealand law and administered in New Zealand.^21,22

A U.S. person who funds it is owner when it has a U.S. beneficiary; a foreign settlor only in two narrow cases.

Who is treated as owner decides who files Part II and Form 3520-A. A U.S. person who transfers property to the trust is treated as owner of the part it funds for any year in which the trust has a U.S. beneficiary.⁸² Someone who funds the trust while not a U.S. resident and becomes one within 5 years is treated, for this rule and for Part I, as transferring that part of the trust on the day their U.S. residency starts.⁹³ A settlor who is not a U.S. person is treated as owner only if they can revoke the trust alone, or if only they or their spouse can receive distributions during their life.⁹⁴ Otherwise no one is owner, and the trust is taxed as a separate, non-grantor trust.⁹⁵

No relief.

The saving clause leaves the United States free to tax its citizens and residents as if the treaty did not apply,⁷⁵ and none of the provisions it spares concerns foreign trust reporting.⁷⁶

Part I for whoever funds it, Part II and Form 3520-A for an owner, Part III for whoever receives a distribution.

A U.S. person who transfers property to the trust files Part I for that year.⁸¹ A U.S. owner files Part II and makes sure Form 3520-A is filed, or files a substitute, each year.^78,91 A U.S. beneficiary who receives a distribution files Part III for that year.⁸³ A distribution from a non-grantor trust that carries out income the trust kept in earlier years is an accumulation distribution, taxed with an interest charge on Form 4970.⁹⁶ Rev. Proc. 2020-17 does not apply: it covers only retirement trusts and medical, disability, or educational savings trusts.⁹⁷ FBAR (FinCEN Form 114) and Form 8938 are separate and may also apply.⁹⁸

A trust with a New Zealand resident trustee whose settlors have not been New Zealand residents can be a foreign exemption trust, which New Zealand exempts from tax on its foreign income if the trustee registers it with Inland Revenue and files its annual returns.^99,100

Usually a foreign trust.

A trustee holds property for the beneficiaries,²⁰ and a trust administered by a New Zealand trustee under New Zealand law meets neither test for a domestic trust.^21,22 Check the trust deed for its governing law.

A U.S. person who funds it is owner when it has a U.S. beneficiary; a foreign settlor only in two narrow cases.

As for a family trust. A U.S. person who transfers property to the trust is treated as owner of the part it funds for any year in which it has a U.S. beneficiary,⁸² and someone who funds it and becomes a U.S. resident within 5 years is treated as transferring that part on the day their residency starts.⁹³ A settlor who is not a U.S. person is treated as owner only if they can revoke the trust alone, or if only they or their spouse can receive distributions during their life.⁹⁴

No relief.

As for a family trust.^75,76

The same as a family trust; registering in New Zealand files nothing in the United States.

The same as a family trust: Part I for a U.S. person who funds it, Part II and Form 3520-A for a U.S. owner, Part III for a U.S. beneficiary who receives a distribution, and Form 4970 on an accumulation distribution from a non-grantor trust.^81,78,83,96 Registering the trust and filing its returns in New Zealand does not file anything in the United States. FBAR (FinCEN Form 114) and Form 8938 are separate and may also apply.⁹⁸

Outside KiwiSaver, New Zealanders invest through managed funds, often unit trusts, and many are portfolio investment entities (PIEs), taxed at each investor's prescribed investor rate.¹⁰¹ Like a KiwiSaver scheme, a managed fund is a scheme in which investors contribute money for returns produced by someone else's efforts, and its custodian holds the property on trust.^23,19

Usually not a trust: a foreign corporation for U.S. purposes.

Usually not a trust for U.S. purposes. An investment trust whose manager can vary its investments is not classified as a trust,²⁴ and a managed fund has none of KiwiSaver's statutory retirement purpose or lock-in. As a foreign entity, it is treated as a corporation if all its investors have limited liability, unless it elects otherwise.¹⁰² A fund that cannot change its investments may be a trust; check the trust deed.

No owner: the grantor trust rules do not reach a corporation.

The grantor trust rules apply to trusts, so no one is treated as owner of a fund treated as a corporation; its investors hold shares in a foreign corporation.¹⁰² The PFIC rules may apply to them; this site does not determine PFIC status.

No effect.

No treaty provision changes how the fund is classified or reported.⁷⁵

No Form 3520 or 3520-A for a fund treated as a corporation.

For a fund treated as a corporation: no Part I, Part II, Part III, or Form 3520-A, and no Form 4970, because Forms 3520 and 3520-A report foreign trusts.^81,78,83 A fund that is a trust is reported under the trust rules above.²⁴ FBAR (FinCEN Form 114) and Form 8938 are separate and may also apply.⁹⁸