Is KiwiSaver a PFIC? U.S. Tax Rules for Americans in New Zealand

Is KiwiSaver a PFIC? Usually, yes, at the fund level. Most KiwiSaver funds are treated as Passive Foreign Investment Companies, which means annual Form 8621 reporting and harsh default tax on withdrawals. Some advisers also treat the scheme as a foreign trust, which adds Forms 3520 and 3520-A. The U.S.-New Zealand tax treaty does not defer U.S. tax on KiwiSaver growth the way the U.S.-Canada treaty does for RRSPs. Either way, KiwiSaver counts for the FBAR and Form 8938. The KiwiSaver U.S. tax bill is manageable once you pick a method on purpose and plan your withdrawals.

Key Takeaways

• Is KiwiSaver a PFIC? Most KiwiSaver funds are treated as PFICs, fund by fund, but the IRS has not ruled on KiwiSaver, and some advisers argue the scheme is a foreign trust instead.
• Does the treaty fix it? No. The saving clause keeps U.S. tax on citizens, and the treaty has no provision deferring U.S. tax on pension growth. It names KiwiSaver as a "pension fund," but that helps the fund and its FATCA status, not your own tax.
• What do you have to file? The FBAR and Form 8938 when thresholds are met, Form 8621 for each PFIC unless an exception applies, and possibly Forms 3520 and 3520-A.
• Are contributions taxable? Your own contributions are not deductible. Employer and government contributions are generally taxable income on your U.S. return.
• How do you cut the tax? Choose a PFIC method deliberately, use the $25,000 exception while balances are small, avoid needless fund switches, and plan your exit.

Most Americans in New Zealand join KiwiSaver the way most Kiwis do: automatically, through a new job, with 3.5% of pay going in and the employer matching it. Nobody mentions the IRS. The first signal is often a year-end statement, a new tax preparer, or a bank form asking about U.S. status, and by then several years of reporting may be missing. This guide explains the KiwiSaver U.S. tax rules in plain terms: why the KiwiSaver PFIC question has no single clean answer, what the treaty does and does not do, what you must file, and how to reduce both the tax and the paperwork, updated for 2026.

Which Situation Are You In?

KiwiSaver U.S. Tax at a Glance

KiwiSaver U.S. tax rules are hard because New Zealand and the U.S. disagree on almost every layer: how contributions are taxed, how earnings are taxed, and what a withdrawal is.

Note: New Zealand's tax year runs from April 1 to March 31, while the U.S. year is the calendar year, and your provider's annual statement may stop at March 31. The U.S. return needs December 31 values, so ask for them.

Is KiwiSaver a PFIC?

This is the question every American in New Zealand asks, and the honest answer is "usually, but it depends on how the IRS classifies the scheme." There are three views, and practitioners hold all three:

• A PFIC, fund by fund. A KiwiSaver fund is a pooled fund that invests in shares, bonds, and cash. If it is treated as a foreign corporation and 75% or more of its income, or 50% or more of its assets, is passive, it is a PFIC. That is the most common treatment, and it means one Form 8621 for each fund you hold.
• A foreign grantor trust. Some advisers say the scheme is a foreign trust and you are its owner, which means Forms 3520 and 3520-A, plus annual tax on the trust's income whether or not you withdraw anything. They argue the scheme's structure, not its investments, decides the answer.
• An employer benefit trust. Others say KiwiSaver resembles a funded employer plan under section 402(b). Under that view, employer contributions are taxed when they vest, earnings inside the trust are not taxed until you take money out, and withdrawals are taxed to the extent they exceed the contributions you already paid tax on. Some analyses split the scheme, treating the employer's share as an employees' trust and your own contributions as a grantor trust.

The IRS has not ruled on KiwiSaver. The one relief that could help is Revenue Procedure 2020-17, which removes Forms 3520 and 3520-A for certain "tax-favored" foreign retirement trusts. KiwiSaver likely meets the tax-favored test, because a government subsidy counts, and it allows first-home withdrawals, which the Revenue Procedure permits. The sticking point is contributions. The Revenue Procedure allows only contributions from earned income, and it requires either a percentage-of-earnings limit, an annual cap of $50,000, or a lifetime cap of $1,000,000. KiwiSaver accepts voluntary contributions from people with no earnings and has no overall cap, so many advisers conclude it does not qualify. Even if it did, the relief reaches only Forms 3520 and 3520-A, and only for people who are compliant with their income reporting. It does not touch Form 8621, the FBAR, or Form 8938.

For the PFIC rules in full, see NSKT Global's guide to Form 8621 and PFIC reporting.

Does the U.S.-New Zealand Tax Treaty Help?

No, not for your own tax. The treaty leaves the KiwiSaver U.S. tax treatment to U.S. domestic law. It was signed in 1982 and amended by a protocol signed in 2008, which took effect in 2010. Four points explain why it does not change the New Zealand KiwiSaver U.S. tax rules:

• The saving clause. Article 1(3) lets the U.S. tax its citizens and residents as if the treaty did not exist.
• No deferral provision. Article 18 covers pensions and annuities in two short paragraphs. Unlike Article 18(7) of the U.S.-Canada treaty, which defers U.S. tax on RRSP growth, nothing in the New Zealand treaty defers U.S. tax on a pension fund's earnings. For how the Canadian rule works, see NSKT Global's guide to the U.S.-Canada tax treaty.
• KiwiSaver is named, but not for you. The 2008 protocol defines a "pension fund" to include a KiwiSaver scheme registered under the KiwiSaver Act 2006. That lets the fund itself qualify as a treaty resident when it holds U.S. investments, and, as explained below, it affects FATCA. Some people read the naming as a U.S. tax shield for members. It is not one.
• No treaty exception from Form 8621. The annual-filing exception for PFICs held in a retirement plan applies only when a treaty provides that earnings are not taxed until distribution. The New Zealand treaty does not, so the exception is unavailable.

The treaty does help on one point. Under Article 18(1)(b), social security payments, which generally include New Zealand Superannuation and U.S. Social Security, are taxable only by the paying country, and that rule survives the saving clause. For the wider picture, see NSKT Global's guide to U.S. tax treaties for expats.

What You Must Report

KiwiSaver tax for U.S. citizens comes down to four filings, and the first two apply even if you decide KiwiSaver is not a PFIC. PFIC reporting in New Zealand is the heaviest of the four:

KiwiSaver counts as a foreign financial account for the FBAR and a specified foreign financial asset for Form 8938. For the thresholds and penalties, see NSKT Global's guides to FBAR and FATCA reporting for expats, FBAR vs Form 8938, and Form 8938 for expats. The trust forms carry heavy penalties: Form 3520 starts at the greater of $10,000 or 35% of the amount, and Form 3520-A at the greater of $10,000 or 5% of the trust assets.

Does the IRS Hear About Your KiwiSaver?

Probably less than it hears about your bank accounts, but do not rely on that. New Zealand and the U.S. have a FATCA agreement, and New Zealand banks and other reporting institutions send details of U.S.-held accounts to Inland Revenue, which passes them to the IRS. Inland Revenue's own guidance, however, says it expects a KiwiSaver scheme with mostly New Zealand resident members to be a "treaty-qualified retirement fund," which makes it an exempt, non-reporting institution under the agreement. That is the practical effect of the treaty naming KiwiSaver: the provider generally does not report its U.S. members.

That is not permission to skip the forms. Your ordinary New Zealand bank accounts are still reported, the treaty's exchange-of-information article lets the two tax authorities share information on request, and your FBAR, Form 8938, and Form 8621 duties depend on you, not on whether the provider reports you. Mismatches between your bank-account reporting and your return can also draw questions about the accounts you left off.

How KiwiSaver Is Taxed on Your U.S. Return

The KiwiSaver U.S. tax treatment builds in layers, and each one needs a decision:

• Your contributions. They are not deductible, so you pay U.S. tax on that pay and no more.
• Employer contributions. KiwiSaver is not a qualified U.S. retirement plan, so most advisers treat employer contributions as taxable compensation. Under the section 402(b) rules for funded employer plans, they are taxed when they vest, and compulsory employer contributions to KiwiSaver generally belong to you straight away.
• Government contributions. Most advisers treat the annual government contribution as taxable income when it is paid.
• Fund earnings. Under the PFIC view, how they are taxed depends on your method (see below). Under the trust view, you may owe tax on the scheme's income each year.
• The credit. The New Zealand income tax on your salary is creditable against your U.S. bill through the foreign tax credit. Whether the PIE tax the fund pays on your behalf counts as a foreign tax you paid is unsettled. Some advisers allow a credit, while others say it rarely works because the fund pays the tax, the timing differs from the PFIC tax, and the PFIC interest charge is never creditable. See NSKT Global's guide to the foreign tax credit.
• The 3.8% NIIT. PFIC income, whether it arises under the default method, an MTM election, or a QEF election, can count as net investment income. Above $200,000 of income for a single filer, the NIIT can apply, and the foreign tax credit does not offset it. The Federal Circuit held on August 31, 2026 that the Canada and France treaties provide no credit against the NIIT, and the New Zealand treaty uses the same "subject to the limitations" wording, so plan as if no credit is available.
• The exclusion. The Foreign Earned Income Exclusion covers wages and self-employment income, not KiwiSaver earnings or employer contributions. See NSKT Global's guide to the foreign earned income exclusion.

The Three PFIC Methods

If the KiwiSaver PFIC view applies, you tax each fund under one of three methods, and the choice drives the whole outcome. You don't pick a method once for your whole KiwiSaver account. Each fund is tested separately, so a member with two funds could end up under two different methods.

When the Excess Distribution Method Applies

This method applies automatically. You don't elect into it. It covers any fund where you have not made a valid MTM or QEF election, and it also covers the years before a late election. Under this method:

• Tax is triggered by withdrawals and sales, not by growth. In a year with no withdrawal and no fund switch, there is usually no PFIC tax, only the Form 8621 filing (unless the $25,000 exception applies).
• An "excess distribution" is the part of a withdrawal that is more than 125% of the average you received in the three previous years.KiwiSaver members usually take nothing out for years and then make one large withdrawal, so most of a first-home or retirement withdrawal is typically an excess distribution.
• All gain on a sale counts as an excess distribution. This includes switching funds or providers.
• The amount is spread back over your holding period. The share allocated to the current year, and to any years before the fund became a PFIC for you, is taxed as ordinary income. The share allocated to earlier years is taxed at the highest ordinary rate for each of those years, plus interest. The longer you have held the fund, the larger the interest charge.

This method suits members whose balances are small, who expect to keep the $25,000 exception, or whose funds don't qualify for MTM. It is the worst fit for anyone planning a large lump-sum withdrawal after many years.

When a Mark-to-Market Election Applies

An MTM election is available only if the fund's units count as "marketable stock" (see the conditions under step 2 below). It applies as follows:

• How to make it: attach Form 8621 to a timely filed return, including extensions, for the first year you want the election to apply.
• How long it lasts: it covers that year and every later year. It ends only if the fund stops being marketable or the IRS agrees to a revocation. You can't switch it on and off from year to year.
• What you report each year: any increase in the fund's value from January 1 (or your purchase date) to December 31 is ordinary income. A decrease is deductible only up to the MTM income you have already reported and not reversed.
• Electing in your first year: the election works cleanly, and there is no interest charge.
• Electing in a later year: in the first election year, the gain is still taxed under the excess distribution rules, with interest for the earlier years. After that, the fund moves to annual MTM reporting.
• Effect on the $25,000 exception: once an MTM election is in place, the exception no longer applies to that fund. You file Form 8621 for it every year, whatever the balance.

MTM suits members whose funds pass the marketable-stock test, who expect their balance to grow above $25,000, or who plan a first-home or retirement withdrawal and would rather pay modest tax each year than a large tax-and-interest bill at the end.

When a QEF Election Applies

A QEF election is possible only if the fund gives you a PFIC Annual Information Statement each year. Without one, it can't be made or maintained.

• How to make it: attach Form 8621 to a timely filed return for the first year you hold the fund. It then continues in later years.
• What you report each year: your share of the fund's ordinary earnings as ordinary income, and your share of its net capital gain as long-term capital gain, whether or not you receive anything.
• Electing late: the earlier years stay under the excess distribution rules unless you also make a "purging" election. A purging election treats the fund as sold at the start of the QEF year and taxes that deemed gain under the default method.
• Ongoing condition: if the provider stops issuing the statement, you can't keep complying with the election.

QEF is often the best treatment where it is available, because capital gains keep their lower rate. For KiwiSaver, though, it is rarely an option, because New Zealand providers generally do not issue the statement. Ask your provider before you rule it out.

Which Method Applies to You?

An MTM or QEF election must be made on a timely filed Form 8621. The first year matters most. Electing in your first year avoids the default regime's catch-up rules, while a later election leaves earlier gain under the default method.

Five Ways to Reduce the Tax and the Paperwork

The five steps below do most of the work in managing KiwiSaver tax for U.S. citizens.

1. Know What You Own

Ask your provider three questions: what is the legal structure of the scheme and each fund, can it supply a PFIC annual information statement, and can you get December 31 balances. Then make a list of every KiwiSaver fund you hold, because Form 8621 is filed fund by fund. Your answers decide which of the three views your preparer takes.

2. Choose a PFIC Method on Purpose

Doing nothing means the default excess distribution regime. An MTM election can turn a possible large tax-and-interest bill at withdrawal into modest tax each year, but it is available only for "marketable stock." Units of a foreign fund that are not listed on an exchange qualify only if the fund meets all of these conditions under Treasury Regulation section 1.1296-2(d): more than 100 unrelated holders, units available to the public at net asset value with no minimum initial investment above $10,000, prices published at least weekly in a source the fund does not control, annual audited financial statements made public, supervision as an investment company by a foreign government, no senior securities or more than minimal debt, and at least 90% passive income and passive assets. Many KiwiSaver funds may meet some of these and not others, so your preparer has to test each fund against the list. The timing also matters, because electing late can leave the earlier gain under the default method, so decide in your first year. QEF is rarely workable because the information statements are not available.

3. Use the $25,000 Exception While Balances Are Small

You do not have to file Form 8621 for a year if the total value of your PFIC stock is 25,000orless(50,000 on a joint return), you took no excess distribution, you sold nothing, and you have no QEF or MTM election in place. For many members in the first years of KiwiSaver, that removes the annual filing. It does not remove the default regime's tax if you later withdraw, and the FBAR and Form 8938 still apply.

4. Avoid Needless Fund Switches

Moving money between KiwiSaver funds, or moving to a new provider, is generally a sale of PFIC stock, and the $25,000 exception does not cover a year with a sale. Under the default regime, that sale can create an excess distribution. A member who switches providers also files Form 8621 for both funds that year. Pick a fund that fits your horizon and change it deliberately, not out of habit. A cash or deposit fund may be classified differently from a share fund, so ask your preparer how each fund type in your scheme is treated before you switch.

5. Decide About Contributions and Your Exit

Both of these are within your control.

• Contributions. The employer match is real money, and a savings suspension or opt-out means giving it up. An employer is not required to contribute while you are on a savings suspension. You can opt out between day 14 and day 56 of a new job, and after 12 months you can suspend contributions for three months to five years. Compare the match with the added U.S. cost before you decide.
• Exit. KiwiSaver withdrawals are tax-free in New Zealand at 65, for a first home after three years, for hardship or serious illness, and on permanent emigration to a country other than Australia after 12 months. Under the default regime, a large lump sum can carry excess distribution tax and interest in the U.S., so model the withdrawal before you take it.

For the filing mechanics, see NSKT Global's guide to dual U.S. citizen tax obligations.

What to Gather Before You File

A preparer cannot report KiwiSaver from a single balance. Collect these for each year you hold it:

• December 31 statements. The balance at year-end and the highest balance during the year, in New Zealand dollars, for each fund.
• Transaction history. Contributions, withdrawals, fund switches, and provider changes, with dates, because each one can matter under the PFIC rules.
• Contribution records. Your own, your employer's (before and after the employer superannuation contribution tax), and the government contribution.
• Tax statements. The annual PIE tax statement and your PIR.
• Scheme documents. The product disclosure statement and, if you can get it, the trust deed, which helps your preparer decide between the PFIC and trust views and test each fund against the mark-to-market conditions.

Keep these with your return. They also support any Streamlined filing later.

Special Cases for Americans in New Zealand

First-Home Withdrawals

A first-home withdrawal is tax-free in New Zealand, but it is a distribution on the U.S. side. Under the default regime, the amount can be an excess distribution. With an MTM election in place, the tax has largely been paid year by year, so the withdrawal itself matters less. Model the withdrawal against your election before you sign the purchase agreement.

Leaving New Zealand

If you leave for a country other than Australia, you can apply to withdraw after 12 months, and you must repay the government contributions you received. If you move to Australia, you cannot cash out, but you can transfer your KiwiSaver to an Australian super fund, which brings up the super questions in NSKT Global's guide to the U.S.-Australia tax treaty.

New Zealanders Moving to the U.S.

If you hold KiwiSaver and become a U.S. tax resident, through a green card or by meeting the substantial presence test, the same rules start applying from that point: the FBAR, Form 8938, and PFIC reporting for each fund. There is one planning opportunity. For a first-year MTM election, the tax code treats your basis in marketable PFIC stock as the higher of its market value or its cost on the first day you become a U.S. person, so gains that built up before you arrived are not taxed under the PFIC rules. That only helps if the funds qualify as marketable stock and you elect in your first year, so plan the election before you move. Your New Zealand contribution and government-contribution eligibility can also change when you live overseas, so check with your provider.

Children's Accounts

A child's KiwiSaver account is a foreign account if the child is a U.S. person, and a parent files for the child. The same FBAR, Form 8938, and PFIC questions apply, even for small balances.

Accidental Americans

Some people discover they are U.S. citizens through birth in the U.S. or a U.S. parent, and learn about KiwiSaver reporting only when a bank asks for a U.S. tax identification number. The usual first step is to get a taxpayer identification number, then work out which years are missing.

Missed Filings

If you have held KiwiSaver for years and never reported it, the exposure is the filings, not just the tax, and missed PFIC reporting in New Zealand can be the costliest gap. Failing to file Form 8621 can keep the statute of limitations open on your return, and a missed FBAR can carry a penalty of up to $16,536 per report for a non-willful violation. If your failure was non-willful, the Streamlined Filing Compliance Procedures let you catch up with three years of returns and six years of FBARs, with no penalty for people living abroad. See NSKT Global's guide to the Streamlined Filing Compliance Procedures.

A Quick Test: Where Do You Stand?

1. Are you a U.S. person with a KiwiSaver account? If yes, the FBAR applies above $10,000 combined, and Form 8938 applies above its higher thresholds.
2. Is the total value of your PFIC stock above $25,000, or did you withdraw or switch funds this year? If yes, you likely need Form 8621 for each fund.
3. Does your adviser treat the scheme as a foreign trust? If so, expect Forms 3520 and 3520-A.
4. Have you chosen a PFIC method? If not, you are on the default regime, so decide before your first withdrawal.
5. Have you reported employer and government contributions as income? If not, correct it before you file.
6. Have you missed any years? Use the Streamlined procedures before the IRS contacts you.

KiwiSaver tax for Americans is a planning problem, not a mystery, and the earlier you pick a method and start reporting, the cheaper KiwiSaver U.S. tax compliance becomes. The treaty will not do the work for you, so the choices above are where the savings are.

How NSKT Global Can Help

Joining KiwiSaver is rarely a deliberate tax decision, and sorting it out does not have to be painful. NSKT Global prepares U.S. returns for Americans in New Zealand, decides how each KiwiSaver fund should be reported, handles Form 8621, FBAR, Form 8938, and trust filings, and models withdrawals before you take them. We also help clients who missed prior years through the Streamlined procedures. Book a consultation and we will map out exactly where your KiwiSaver stands.

People Also Ask

Q. Is KiwiSaver a PFIC?

Usually, at the fund level. Most KiwiSaver funds are treated as PFICs and reported on Form 8621, one form per fund, but the IRS has not ruled on KiwiSaver, and some advisers treat the scheme as a foreign trust instead.

Q. Does the U.S.-New Zealand tax treaty exempt KiwiSaver from U.S. tax?

No. The saving clause keeps U.S. tax on citizens, and the treaty has no provision deferring U.S. tax on pension growth. It names KiwiSaver as a "pension fund," but that benefits the fund as a treaty resident and affects FATCA reporting, not your own tax.

Q. Do I report KiwiSaver on the FBAR and Form 8938?

Yes, when the thresholds are met. KiwiSaver is a foreign financial account for the FBAR, which applies above $10,000 combined, and a specified foreign financial asset for Form 8938, which starts at $200,000 for a single filer abroad.

Q. Is KiwiSaver taxed in the U.S. every year?

The U.S. tax on KiwiSaver depends on your method and on how the scheme is classified. Under the default PFIC regime, tax usually arrives at withdrawal with an interest charge. Under an MTM election, you report the year's gain each year, and under a trust view, you may owe tax on the scheme's income annually.

Q. Are employer and government contributions taxable in the U.S.?

Generally yes. KiwiSaver is not a qualified U.S. plan, so most advisers treat employer contributions as taxable compensation and the government contribution as taxable income when paid. Your own contributions are not deductible.

Q. Do I need Form 3520 for KiwiSaver?

Possibly. If the scheme is a foreign trust, you file Form 3520 and the trustee files Form 3520-A. Advisers disagree, and Revenue Procedure 2020-17 relief probably does not apply because KiwiSaver has no contribution cap, so ask your preparer to document the position.

Q. Can I use the $25,000 exception for KiwiSaver?

Yes, if the total value of all your PFIC stock is 25,000orless(50,000 joint), and you had no excess distribution, no sale, and no election. It excuses the annual Form 8621, not the FBAR, Form 8938, or the tax on a later withdrawal.

Q. What happens when I withdraw my KiwiSaver?

The withdrawal is tax-free in New Zealand but can be taxable in the U.S. under the New Zealand KiwiSaver U.S. taxrules. Under the default PFIC regime, the gain is spread over your holding years and taxed at top rates with an interest charge. With an MTM election in place, the tax has largely been paid along the way.

Q. Should an American in New Zealand join KiwiSaver?

It depends. The employer match is valuable, but KiwiSaver tax for Americans can offset it, especially under the default PFIC regime. Compare the match with the added tax and filing cost before you stay in or take a savings suspension.

Q. Will my KiwiSaver provider report me to the IRS?

Probably not through FATCA. Inland Revenue's guidance says it expects KiwiSaver schemes with mostly New Zealand resident members to be exempt, non-reporting institutions. Your reporting duties do not depend on that, and your New Zealand bank accounts are still reported.

Q. Can I make a mark-to-market election for my KiwiSaver funds?

Only for funds that count as marketable stock. A fund that is not listed on an exchange must meet several conditions, including more than 100 unrelated holders, units available at net asset value with no minimum above $10,000, weekly published prices, audited annual statements, government supervision as an investment company, and at least 90% passive income and assets. Your preparer has to test each fund.

Q. I am a New Zealander moving to the U.S. What happens to my KiwiSaver?

The U.S. rules apply from the day you become a U.S. tax resident. If your funds qualify and you elect in your first year, your basis in marketable PFIC stock is stepped up to market value on your first day, so earlier gains are not taxed under the PFIC rules. Plan the election before you move.

Q. What if I never reported my KiwiSaver?

If your failure was non-willful, the Streamlined Filing Compliance Procedures let you catch up without penalty if you live abroad. Act before the IRS contacts you.