Tax on attributed income from a PIE
How PIEs calculate the tax
Most PIEs will calculate their tax liability based on the prescribed investor rate (PIR) provided by their investors rather than at the entity's tax rate. This type of PIE is called a multi-rate PIE (MRP)
PIEs that are not MRPs include:
- listed companies that are not MRPs
- defined benefit funds, and
- life funds that are not MRPs.
These PIEs do not calculate their tax liabilities using their investors' PIR. Instead their tax liability is calculated using the entity's basic tax rate.
Your PIE and your prescribed investor rate (PIR)
The partners hold the investment. So, the partnership should split the investment and give the PIE the IRD number and PIR that applies for each partner/holder. That is, zero-rated investors would apply the 0% PIR while individuals would advise the 10.5%, 17.5% or 28% rates determined by the taxable income received in the previous two income years. Partners who are trustees would be able to choose 0%, 17.5%, 28% or in certain cases 10.5%.
If the partners do not give the MRP their PIR and IRD number, the MRP will deduct PIE tax at the default rate of 28% which may be higher than the actual rate.
Limited partnerships are also not treated as separate entities for the purposes PIE rules.
Which IRD number partners use
A partnership investor in a MRP, including zero-rated investors, should give their partners'/holders' IRD numbers at the same time as they give their PIR or within one month of a request from the MRP. Where the partners/holders have not given their IRD numbers to the MRP, the default rate of 28% will be applied to the income attributed by the MRP, which may be higher than the actual PIR applicable for the partner/holder.
Date published: 21 Sep 2010
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