Prescribed investor rates for notified foreign investors

There are new prescribed investor rates that a variable-rate PIE is required to use when calculating the tax on income attributed to notified foreign investors. These rates are design to mimic or align the tax treatment with that of a non-resident who invests directly.

• For all offshore income the zero rate is applied.
• For interest income an approved issuer levy (AIL) type rate of 1.44% is applied. The normal AIL rate is 2% as a deductible amount at the PIE tax rate of 28%, the net amount is (2% minus 0.56% equals 1.44%).
• An amount derived from a financial arrangement that is not interest has a zero rate.
• Fully imputed dividends will have the zero rate applied as 33% tax had been paid by the company paying the dividend.
• For unimputed dividends or the portion of the dividend from New Zealand companies there are two possible rates based on the residence of the notified foreign investor. If the notified foreign investor resides in a country which we hold a double tax agreement with the rate is 15%. For notified foreign investors who reside in other offshore countries the rate is 30%. These rates align with the NRWT rules that apply to a non-resident investor who invest directly.
• For other New Zealand income the rate is 28%, remembering the PIE cannot invest in land or derive income from land, including the disposal of land.

This reflects the tax treatment that non-residents would have received had they received the income directly.

These rates only apply to notified foreign investors.

Date published: 30 Aug 2011

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