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What is a PIE?

Introduction

A portfolio investment entity (PIE) is a new type of entity, such as a managed fund that invests the contributions from investors in different types of investments.

New tax rules have allowed eligible entities to become PIEs from 1 October 2007.

Eligible entities that elect to become a PIE will generally pay tax on investment income based on the prescribed investor rate (PIR) of their investors, rather than at the entity's tax rate. However, the PIR for non-residents is who is not a notified foreign investor is 28%.

Income earned through a PIE will generally not affect investors' student loan or child support obligations. If the funds you have in the PIE are locked in such as in a KiwiSaver and similar superannuation funds, the PIE income will not affect your Working for Families Tax Credits. Otherwise the PIE income must be included in family income and will need to be included on the Working for Families Tax Credits income adjustment form.

Foreign investment PIEs

Previously non-residents investors could only use the 28% PIR. This means they are over-taxed in comparison with the tax rates they would face if they invested directly in the assets in the PIE. In particular, if a non-resident invests directly into foreign-sourced assets, the income is not subject to New Zealand tax.

Two new categories of PIE have been introduced that correct this treatment.

  • A zero-rate PIE that invests the vast majority of its funds offshore. The PIE applies the 0% PIR to all income attributed to notified foreign investors.
  • A foreign investment variable-rate PIE that invests its funds both in New Zealand and offshore. Notified foreign investors in this category of PIE face various tax rates, depending on the source and type of the income.

Eligible entities

Entities that meet the eligibility requirements can elect to become a PIE if they are a:

  • managed fund, such as a:
    • unit trust, or
    • superannuation fund
  • company
  • benefit fund
  • life fund, or
  • group investment fund.

To find out more about the types of PIEs, please read Portfolio investment entities (PIE).

Investing in a PIE

We cannot comment or provide advice on how or where you should invest. You should also talk to your tax agent or financial adviser.

Record-keeping requirements

There are no record-keeping requirements for excluded income.

If the PIE income is not excluded income:

  • because it been taxed at a zero rate, or
  • you have given the PIE a rate lower than your correct rate

then you must keep your records relating to that income for seven years.

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Date published: 30 Aug 2011

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