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HM 5: What is an investor class?
or “An investor class is a group of investors with equal rights and similar investment shares in an entity”
You could also call this:

“How tax works for multi-rate PIEs and their investors”

This law explains how a special type of investment company, called a multi-rate PIE, works for investors. When you invest in a multi-rate PIE, the company pays tax on the money it makes for you. The amount of tax it pays depends on your personal tax rate.

If you’re a person living in New Zealand or a certain type of trust, the PIE will pay tax that’s similar to what you’d pay if you made the investments yourself. If you’re a foreign investor in a foreign investment PIE, the tax will be based on where the money comes from and what type of investment it is.

For other types of investors, the PIE doesn’t have to pay any tax on the money it makes. After the PIE pays the tax, it gives you your share of the money that’s left.

As an investor, you don’t have to pay extra tax on the money the PIE makes for you, unless the PIE used a lower tax rate than it should have for you. You also don’t have to pay extra tax if you’re a foreign investor who was treated as a special type of investor when you shouldn’t have been.

You do have to pay tax on any money you make from investments where the PIE didn’t pay tax. Overall, you should get about the same amount of money after tax as if you had made the investments yourself.

The law also says that there might be some changes to the tax you pay if you get a special type of income called PIE schedular income.

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Next up: HM 6B: Optional look-through rules for certain PIEs

or “Optional rules for investment funds to treat income from other funds as their own”
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Part H Taxation of certain entities
Portfolio investment entities: Introductory provisions

HM 6Intended effects for multi-rate PIEs and investors

  1. The intended effects for an entity that is using funds supplied by investors to make investments of certain types and that meets the requirements for multi-rate PIE status are that—

  2. in relation to proceeds of the investments that are attributed to investors who are natural persons or certain trustees, the PIE has a tax liability—
    1. calculated using a tax rate for each investor; and
      1. resembling the total tax liability the group of investors would have if the investors were to make the investments separately:
      2. in relation to proceeds of the investments that are attributable to notified foreign investors in a foreign investment PIE, the PIE has a tax liability—
        1. calculated using a tax rate that is appropriate having regard to the income source and investment type; and
          1. resembling the tax liability of the investor if they were to make the investment directly:
          2. the PIE has no tax liability on proceeds of the investments that are attributed to other investors:
            1. the PIE allocates to each investor amounts resembling the amounts that the investor would receive, after allowing for the tax paid by the PIE if making the investment separately.

              1. The intended effects for an investor in the multi-rate PIE are that—

              2. the investor has no tax liability on income arising from proceeds for which the PIE has a tax liability, unless—
                1. the PIE has applied a rate that is lower than the investor’s prescribed investor rate:
                  1. the investor has been treated by a foreign investment PIE as a notified foreign investor for a period in which they do not in fact meet the requirements of section HM 55D for notified foreign investor status:
                  2. the investor is liable for tax on any assessable income arising from proceeds for which the PIE has no tax liability:
                    1. the investor receives on the investment in the PIE an economic return that the investor would receive after payment of tax liabilities if personally making investments similar to those made by the PIE in which they have an investor interest:
                      1. despite paragraphs (a) and (b), an adjustment may be made to the schedular income tax liability of an investor who derives PIE schedular income.

                        Compare
                        • s HL 1(2)(a)
                        Notes
                        • Section HM 6: inserted, on (applying for the 2010–11 and later income years), by section 292(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                        • Section HM 6(1)(a): amended (with effect on 1 April 2010), on (applying for the 2010–11 and later income years), by section 54(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                        • Section HM 6(1)(ab): inserted, on (applying for the 2012–13 and later income years for a foreign investment variable-rate PIE and a notified foreign investor in the PIE), by section 54(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                        • Section HM 6(2)(a): substituted, on (applying for the 2012–13 and later income years for a foreign investment variable-rate PIE and a notified foreign investor in the PIE), by section 54(3) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                        • Section HM 6(2)(a)(i): replaced, on , by section 147(1) (and see section 147(4) for application) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
                        • Section HM 6(2)(b): amended (with effect on 1 April 2010), on (applying for the 2010–11 and later income years), by section 87(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                        • Section HM 6(2)(d): inserted, on , by section 147(2) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
                        • Section HM 6 list of defined terms foreign investment PIE: inserted, on , by section 54(4) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                        • Section HM 6 list of defined terms notified foreign investor: inserted, on , by section 54(4) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                        • Section HM 6 list of defined terms PIE schedular income: inserted, on , by section 147(3) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
                        • Section HM 6 list of defined terms schedular income tax liability: inserted, on , by section 147(3) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).