Portfolio investment entity (PIE) entry rules - general requirements
Income type requirement
At least 90% of the entity's income must be passive income, such as dividends, interest and rent. Generally, an entity may carry on any business activity so long as it satisfies the PIE eligibility requirements. For instance a PIE may own and lease land and buildings. As long as it is not in active businesses it may become a PIE, subject to eligibility. Examples of non-active businesses are listed property trusts that own commercial property.
Example
A company may also run a supermarket. If its interest in the supermarket business exceeds 10% (income sources requirements) of the total income of the company it cannot become a PIE.
The entity must not carry on the business of life insurer. However a life fund PIE as a separate identifiable fund, forming part of a life insurer that holds investments subject to life insurance policies under which benefits are directly linked to the value of the investments may become a PIE.
Residence requirement
The entity must be:
- resident in New Zealand, and
- not treated under a double tax agreement as not being resident in New Zealand.
Example
Blue Limited is a company that was established in New Zealand. However, it moved its head office to Sydney, Australia and maintains an agency in New Zealand.
Under the double tax agreement between Australia and New Zealand, Blue Limited is deemed to be resident in Australia.
Even if Blue Limited satisfied all other requirements, it would not be eligible to become a PIE, as it failed to satisfy the residence requirement.
Re-entry after 5 years
An entity must not have previously ceased to be PIE within a 5-year period before the date on which its election to become a PIE is effective. An entity that has previously ceased to be a PIE may become a PIE again after the expiry of the 5 year period.
Example
PIE A registers as a PIE on 1 October 2007 and ceases on 10 December 2015 due to an eligibility breach. It will not be eligible to re-register as a PIE until 11 December 2020.
Date published: 26 Feb 2010
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