Tax on allocated income from a PIE
A PIE that is not a:
- company listed on the New Zealand stock exchange, or
- defined benefit fund, or
- portfolio investment-linked life fund
will use your prescribed investor rate (PIR) to calculate the tax on the income from your investment.
Tax on allocated income from a PIE, which is treated as excluded income will be paid by the PIE.
PIEs that are either defined benefit funds, listed companies or portfolio investment-linked life funds do not allocate income to investors. Income is taxed at the entity's tax rate.
PIE tax and non-resident withholding tax (NRWT)
Generally, the NRWT rules do not apply to PIE investments.
If you are a resident of a country which New Zealand operates a double taxation agreement (DTA) with, then under the NRWT rules the tax you pay on interest, dividends and royalties would have been limited to prescribed tax rates(usually 10% or 15%).
As the tax on income from your investment in the PIE is actually paid by the PIE:
- the limitation under the DTA will not apply, and
- the tax on your investment will be calculated at 30%, and
- you may not be able to claim the tax paid by the PIE as a credit in your country of residence.
A PIE listed on the New Zealand stock exchange may continue to pay dividends subject to NRWT.
Non-resident investors and rebates
If a rebate applies, the PIE allocates each investor's share of the rebate by adjusting the investor's portfolio investor interest or making a distribution.
Non-residents and prescribed investor rates (PIR)
The PIR for non-residents (including individuals, trusts, companies or other non-resident entities) is 30%. You cannot choose a lower rate.
You will need to give your PIR to the PIE you invest in. However the default rate for failure to advise the PIE your PIR is also 30%.
Excluded income
If you are taxed at 30% (33% up to 1 April 2008) for the whole period, the income allocated for the period will be treated as excluded income and you do not need to include the income in your tax return.
Zero-rated income
As a non-resident investor you may be taxed at a zero rate by certain PIEs when you exit from the PIE during a quarter. If you are taxed at a zero rate the income allocated to you for the quarter needs to be included in your New Zealand income tax return. You must include the allocated income from your PIE with any income from other sources in New Zealand and be taxed accordingly.
Date published: 11 May 2008
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