Zero-rate and variable-rate portfolio investment entities (PIEs) are multi-rate PIEs with overseas investments. Their special tax rates mean non-resident investors do not pay more tax by investing in the PIE than they would if they invested in the PIE’s non-resident assets directly.
A non-resident investor needs to tell their PIE that they are a ‘notified foreign investor’ and the PIE will apply a PIR based on their circumstances.
Zero-rate PIEs
Zero-rate PIEs invest most of their funds in investments outside New Zealand. These PIEs are only allowed a small amount of New Zealand-sourced income.
A zero-rate PIE uses a 0% PIR on all income for notified foreign investors.
Variable-rate PIEs
Variable-rate PIEs invest their funds in New Zealand and overseas.
There is no New Zealand-based investment threshold for this type of PIE.
These PIEs use different rates based on the investor’s country of residence and the type and source of income.
- All offshore income: 0%.
- Income under the financial arrangement rules that is not interest: 0%.
- New Zealand interest income: 1.44%.
- New Zealand unimputed dividend income with an investor that is affected by our double tax agreements: 15%.
- New Zealand unimputed dividend income with an investor that is not affected by our double tax agreements: 30%.
- Any other New Zealand based income: 28%.
A variable-rate PIE can choose to pay non-resident withholding tax (NRWT) on the unimputed part of New Zealand dividends. This allows the notified foreign investor to claim a tax credit in the country they are living in. This income is not treated as PIE income.
Look-through entities
A retail foreign investment PIE that invests into a wholesale PIE can make the wholesale PIE a look-through entity. This lets the PIE identify the notified foreign investor’s source and type of income and tax obligations.
Notified foreign investor requirements
Notified foreign investors are not:
- resident in New Zealand
- a controlled foreign company
- a non-resident trustee of a New Zealand trust
- a foreign investment fund with a New Zealand resident who has an income interest of 10% or more.
Notifying the PIE
Notified foreign investors need to provide their full name, date of birth (if applicable), home country address and tax identification number.
Once every year foreign investment PIEs must check their investors are still notified foreign investors.
Non-resident investors who do not choose to be notified foreign investors must use a 28% PIR.