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Make sure you're using the correct prescribed investor rate (PIR)

From 1 October 2010 there here are four rates: 0%, 10.5%, 17.5% and 28%. Read the information below to identify the correct rate for your circumstances. Only certain trustees are able to choose a rate. All other investors have only one rate that they qualify for.

Resident individuals

Taxable income was $14,000 or less

If, in either of the previous two income years your taxable income was $14,000 or less, and when combined with your PIE income or loss was ... and ... then your PIR is ...
$48,000 or less in the income year   10.5%.
$48,001 to $70,000 in the income year you don't already qualify for 10.5% 17.5%.
$70,001 or more in both of the previous two income years   28%.

Taxable income was $14,001 to $48,000

If in either of the previous two income years, your taxable income plus your PIE income or loss was:

  • $70,000 or less in the income year, your PIR is 17.5%, or
  • $70,001 or more in both of the previous two income years, your PIR is 28%.

Taxable income was more than $48,000

If your taxable income was more than $48,000 in both of the previous two income years, your PIR is 28%.

Note

If for the two previous income years you qualify for two rates, your PIR is the lower rate.

For example, last year your rate is 17.5%, the previous year's rate is 10.5%, so your PIR is 10.5%.

New residents

From 1 April 2012 you need to include your worldwide income when determining your PIR. However, you may choose not to include your worldwide income for either or both of the income years, if you reasonably expect that your taxable income in either of your first two years as a resident will be significantly lower than your total income from all sources for the previous income year(s).

Non-residents

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

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

  1. A foreign investment zero-rate PIE that invests the vast majority of its funds offshore. This PIE applies the 0% prescribed investor rate to all income attributed to notified foreign investors.
  2. 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.

New prescribed investor rates for certain non-residents have been introduced that apply to various types and sources of income attributed to notified foreign investors. A non-resident investor that meets the criteria and notifies their foreign investment PIE can become a notified foreign investor. The foreign investment variable-rate PIE then applies the following rates:

Category Rate
  1. A dividend derived from a company resident in New Zealand attributed to an investor who does not reside in a country with which New Zealand has a double tax agreement, to the extent it is not fully imputed
30%
  1. An amount other than an amount referred to in 1, and 3 to 5, that has a source in New Zealand
28%
  1. A dividend derived from a company resident in New Zealand attributed to an investor who resides in a country which New Zealand has a double tax agreement with, to the extent it is not fully imputed
15%
  1. Interest derived.
1.44%
  1. A fully-imputed dividend derived from a company resident in New Zealand.
0%
  1. A foreign-sourced amount.
0%
  1. An amount derived under a financial arrangement that has a source in New Zealand other than an amount of interest referred to in 4.
0%

If you are a non-resident investor, and you:

  • are not a notified foreign investor, and
  • invest in a PIE that is not a foreign investment PIE

your PIR is 28%.

Transitional residents

You will qualify for the 0% PIR if you invest in a zero-rate PIE. If you have correctly notified the 0% to the PIE the income does not go into your tax return.

 

Other investors

If you are a ... then your PIR is ...
company, incorporated society, PIE or PIE investor proxy (PIP) 0%

trustee (excluding charitable trusts) and Super funds

Note: only trustees of testamentary trusts can choose 10.5%

either 28%, 17.5%, 10.5% or 0%. You can choose one to best suit your beneficiaries.
registered charitable trust 0%
joint investment, partnership or unincorporated society 0%, 10.5%, 17.5% or 28%.

The investment should be split and each partner/holder should give the PIE their correct PIR and IRD number.

When you have calculated your PIR

Once you have calculated your PIR, you need to give your PIE your PIR and your IRD number.

If we identify you are not using the correct rate we can tell your PIE to change your rate. This does not remove your obligation to notify the PIE of your correct PIR.

Additional information

Prescribed investor rate examples

Previous years' rates

 


Date published: 07 Jun 2012

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