Notified foreign investors (NFI) invest in two types of foreign portfolio investment entities (PIEs). These PIEs let investors have a tax result similar to what would apply if they invested directly in the PIE's assets.
A non-resident who derives non-New Zealand sourced income is not liable for New Zealand income tax on that income.
Foreign PIEs can use 0% PIR for the offshore income they attribute to the NFI.
Once every year foreign PIEs must check their investors are still NFIs.
Foreign zero-rate PIE
Zero-rate PIEs invest most of their funds in non-New Zealand based investments. These PIEs only have a minimal amount of funds in New Zealand.
A zero-rate PIE applies 0% PIR to all income attributed to NFIs.
Foreign variable-rate PIE
Variable-rate PIEs invest their funds in New Zealand and offshore.
There is no New Zealand-based investment threshold for this type of PIE.
These PIEs apply the following rates based on the type and source of income:
- All offshore income: 0%
- Income under the financial arrangement rules other than 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 sometimes treat the unimputed portion of New Zealand dividends as liable for non-resident withholding tax (NRWT). This allows the NFI to claim a tax credit in their country of residence. This income is not treated as PIE income.
Look-through entities
A retail foreign investment PIE that invests into a wholesale PIE can treat the wholesale PIE as a look-through entity. This lets the PIE identify the NFI's:
- source and type of income
- expenses.