How PIEs calculate the tax
A PIE that is not a:
- company listed on the New Zealand stock exchange that is not a multi-rate PIE, or
- benefit fund, or
- certain life fund
known as multi-rate PIEs (MRP) will use your prescribed investor rate (PIR) to calculate the tax on the income from your investment.
Resident companies that invest in PIEs have a PIR of 0%, ie they are zero-rated investors. (Non-resident companies that are not a notified foreign investor in a foreign investment PIE have a PIR of 28%).
PIEs that are benefit funds, listed PIEs or life funds that do not attribute income to investors.
Companies investing in:
- listed PIEs that are not MRPs will continue to receive dividends
- benefit funds or life funds that are not MRPs will derive income on realisation.
Your PIE and your prescribed investor rate (PIR)
If you don't give your PIR to your PIE then the default tax rate of 28% applies.
As a resident company is treated as a "zero-rated investor" regardless of the default rate being applied, the attributed income is:
- not treated as excluded income, and
- must be included in your tax return, and you
- can claim the PIE tax paid as a tax credit
- if the PIE tax was a credit then you will need to provide an explanation of this with your return.
You are not entitled to be credited for excess tax credits.
Your attributed income from the PIE and your tax return
When to complete the tax return if you receive attributed income from the PIE
You will continue to file your IR4 and IR4J tax returns by the usual return filing dates.
Unless you have an extension of time to file a tax return, filing dates are:
- 7th of the fourth month after balance date for taxpayers with a late balance date, (ie 1 April to 30 September), or
- 7 July following the end of the tax year for taxpayers with other balance dates.
What goes in your tax return if you have income attributed from a PIE
As a company is a zero-rated investor, all attributed income or loss from the PIE must be included in your tax return (in the "overseas income" panel) and will be assessed along with any other income you receive.
|If the PIE is ...||then ...||and ...|
|a company listed on the NZ stock exchange that is not a MRP||it may continue to pay dividends||
the dividends, unless these amounts exceed the total of fully-imputed distribution, will be non-excluded income and must be included in your tax return.
Any excess is treated as excluded income and does not have to be included in the tax return.
Note: these dividends are not liable to RWT.
||distributions received are treated as excluded income||do not have to be included in your tax return.|
If you withdraw your investment from a PIE you should include the income in the tax return that includes the end of the PIE's income year in which the withdrawal occurred.
If your investment in the PIE is in overseas markets, you do not have to include this for the purposes of the foreign investment fund (FIF) rules. Any calculations under the FIF rules will be made by the PIE.
When your attributed income from the PIE is derived
Your attributed income from the PIE is derived in your income year which includes the end of the PIE's income year. See the following examples.
|If you have a ...||and the PIE you invest in has a...||then as the end of the PIE's 2012 income year falls ...|
|30 June 2012 balance date which is your 2012 income year||31 March 2012 balance date||within your 2012 income year, your income for the 2012 income year will include the attributed income from the PIE to 31 March 2012.|
|31 December 2011 balance date, which is your 2012 income year||31 March 2012 balance date||after the end of your 2012 income year, the attributed income from the PIE for the year ended 31 March 2012 will fall into your 2013 income year.|
PIE income and foreign tax credits
Foreign tax credits available will generally be the lesser of:
- the amount of the attributed credits, and
- the amount calculated by multiplying the income attributed by the MRP by the company's tax rate.
PIE income and New Zealand tax credits
The amount of the attributed New Zealand tax credits flow directly to the company. Limitations to the credits able to be claimed may arise in the company's income tax return.
Attributed income from a PIE and your provisional tax
As a zero-rated investor, your exposure to a provisional tax liability may change.
Previously distributions from your collective investment vehicle (CIV) may have attached credits that could be used against company's income tax liability. Under the PIE rules those credits may no longer be available. See the example below.
|2007 (pre-PIE rules)||2012 (under PIE rules)|
|Income received from CIV||$10,000||$10,000|
|Tax paid (by CIV)||$1,800||(by PIE -zero-rated)||$ 0.00|
|Investor tax due||$3,300||$2,800|
Changes to your investment and your tax liability
There may be tax implications if you:
- withdraw all or part of your investment, or
- change the class of the investment .
Withdrawing your investment
When the PIE attributes PIE income, the company should include that income in the tax return that includes the end of the PIE's income year in which the withdrawal occurred.
Changing the class of your investment
If the investor withdraws from a investor class and reinvests the funds in another investor class of the same PIE, then the PIE can treat the change of class as a partial withdrawal and calculate tax at that time.
Date published: 30 Aug 2011