What is a foreign investment PIE?

There is a new category of PIE called a foreign investment PIE which is a subset of a multi-rate PIE that uses the quarterly or exit filing options. There are two new foreign investment PIE types:

• the zero-rate PIE, and
• the variable-rate PIE.

When an entity or PIE can become a foreign investment PIE

An entity or PIE can become a:

• zero-rate PIE from 29 August 2011
• variable-rate PIE from 1 April 2012.

The timing difference recognises that then need to allow time for system changes to be in place to operate using the variable-rate PIE option.

New class of investor

There is also a new class of investor, a notified foreign investor. This generally is a non-resident person that has provided the additional reporting information and advised their foreign investment PIE that they are a notified foreign investor. 

Tax rates for new notified foreign investors

Zero-rate PIEs will apply the zero rate to attributed PIE income of notified foreign investors. This type of PIE will invest offshore and only hold a minimal amount of investments in New Zealand. Find out more about the threshold rules.

Variable-rate PIEs cater for non-residents who may wish to invest into New Zealand markets or both New Zealand and offshore markets. There is no New Zealand-based investment threshold for this type of foreign investment PIE and each source and type of income has its own tax rate, as follows.

• All offshore income is still zero-rated.
• New Zealand interest income is taxed at a net of tax-based approved issue levy AIL at 1.44%
• New Zealand unimputed dividend income is taxed based on whether the notified foreign investors is resident in a country which we:
  • hold a double tax agreement with (15%) or,
  • don't hold a double tax agreement with (30%).
• Income under the financial arrangement rules other than interest is taxed at 0%
• For other New Zealand based income, the tax rate is 28%.

New Zealand dividends may be liable for non-resident withholding tax (NRWT)

A variable-rate PIE can under certain circumstances treat the unimputed portion of New Zealand dividends that they receive and pass on to notified foreign investors as being liable for non-resident withholding tax (NRWT). This then allows the notified foreign investor to generally claim a tax credit in their country of residence. This income is not treated as PIE income.

When the wholesale PIE can be treated as a look through entity

A retail foreign investment PIE that invests into a wholesale PIE, will be allowed to treat the wholesale PIE as a look through entity so they can identify the notified foreign investor's:

• source and type of income, and
• expenses.

 

Date published: 30 Aug 2011

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