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Your PIE and your prescribed investor rate (PIR)
Multi-rate PIEs (MRP) use your prescribed investor rate (PIR) to work out the tax on the income from your investment.
New Zealand resident companies have a PIR of 0%. As a zero-rated investor, any attributed MRP income must be included in your Income tax return: companies (IR4).
Non-resident companies that are not a notified foreign investor in a foreign investment PIE, have a PIR of 28%.
You need to notify the MRP of your PIR. If you don't do that, then the MRP will apply the default tax rate of 28% for up to six weeks before closing your account.
An MRP is a company, superannuation fund or group investment fund that is eligible to be, and has chosen to be, an MRP.
An MRP can include:
- a company listed on the NZX other than a listed PIE, or
- a foreign investment PIE.
An MRP cannot include:
- a benefit fund PIE, or
- a life fund PIE.
Whether you need to include PIE income on your IR4
Whether you need to include attributed PIE income on your IR4 depends on the type of PIE you invest in.
As a resident company is a zero-rated investor, all attributed income or loss from an MRP must be included in your tax return. Include this income in the overseas income box.
PIEs listed on the NZ stock exchange that are not MRPs
A PIE listed on the NZ stock exchange that is not an MRP may continue to pay dividends. These dividends must usually be included in your tax return.
The exception to this is when the amount of dividends exceed the total of fully-imputed distributions. The excess is then treated as excluded income and does not have to be included in your tax return. You still need to include the amount up to the excess.
PIEs not listed, and do not intend to be listed, on the NZ stock exchange, or MRP
A distribution from a PIE that is not listed, and does not intend to be listed, on the NZ stock exchange does not have to be included on your IR4.
A distribution from an MRP does not have to be included in your IR4. As you include the attributed PIE income from the MRP in your return, any additional distribution from the MRP is treated as excluded income.
If your PIE invests in overseas markets, any calculations under the FIF rules will be made by the PIE.
PIEs and tax credits
When a PIE attributes income that has tax credits such as dividends with imputation and RWT then you include the tax credits in the appropriate boxes in the return and apply the appropriate tax credit treatment.
If the PIE has deducted PIE tax you can claim the PIE tax paid as a tax credit in your tax return.
Foreign tax credits
Foreign tax credits will generally be the lesser of:
- the amount of the attributed credits, or
- the result of multiplying the attributed PIE income by the company's tax rate.
What tax year you declare PIE income on your IR4
Include your PIE income on your IR4 for the tax year your PIE's tax year ends. Here are some examples to help clarify this.
If your 2017 tax year ended 31 January 2017 and your PIE's tax year ended 31 March 2017, you would include your PIE income in your 2018 IR4.
If you and your PIE's 2017 tax year both ended 31 March 2017, you would include your PIE income in your 2017 IR4.
Changes to your investment and your tax liability
Changing the class of your investment
If you withdraw from an investor class and reinvest the funds in another investor class of the same PIE, the PIE can treat the change of class as a partial withdrawal and calculate tax at that time.