Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Taxation of certain entities - Portfolio investment entities - Requirements

HM 12: Income types

You could also call this:

“What kinds of income you can earn from property and investments”

If you get income from a certain type of property, it must be from a specific source. This source is described in section HM 11. Your income must be mostly from things like dividends, replacement payments, and income from leases.

You can also get income from insurance, or from selling property described in section HM 11. Other types of income are also allowed, such as FIF income and attributed PIE income. Sometimes, other laws can override these rules, like section HM 19B(1) and section HM 19C(2).

There’s a special rule about “excluded interest” which is interest from someone you’re associated with, unless they’re a bank or a certain type of investor. This rule doesn’t apply if the interest is from a loan you gave them, and the interest rate is the same as the rate you paid to get the money.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

This page was last updated on

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM2888729.

Previous

HM 11: Investment types, or

"Types of investments an entity must hold"

Next

HM 13: Maximum shareholdings in investments, or

"Limits on how much companies can own in other businesses"

Part H Taxation of certain entities
Portfolio investment entities: Requirements

HM 12Income types

  1. Income derived by the entity, to the extent of 90% or more, must—

  2. be derived from property referred to in section HM 11; and
    1. consist of the following:
      1. a dividend:
        1. a replacement payment:
          1. an amount of income treated under subpart EW (Financial arrangements rules) as derived by the entity, other than an amount of excluded interest:
            1. an amount of income derived from a lease of land, but this subparagraph does not apply if the lessee under the lease is associated with the entity receiving the amount:
              1. insurance, indemnity, or compensation amounts replacing income that would be described in subparagraph (iv):
                1. an amount derived from the disposal of property referred to in section HM 11:
                  1. FIF income:
                    1. attributed PIE income:
                      1. a distribution from a superannuation fund:
                        1. an amount of income under section CW 4 (Annuities under life insurance policies) or CX 40 (Superannuation fund deriving amount from life insurance policy):
                          1. a rebate on a management fee.

                          2. For the purposes of subsection (1)(b)(iii), excluded interest means interest derived from a person associated with the entity other than under section YB 2(3) (Two companies), but does not include interest derived from the person if—

                          3. the person is a registered bank or a licensed non-bank deposit taker:
                            1. the person is—
                              1. a PIE; or
                                1. a foreign PIE equivalent; or
                                  1. an entity that qualifies for PIE status:
                                  2. the interest is on funds the entity loaned to the person that were loaned to the entity by a third party, and the interest rate is either—
                                    1. the same for both loans; or
                                      1. the weighted average of interest rates incurred by the entity under all active loans from third parties.

                                      2. Section HM 19B(1) overrides this section.

                                      3. Section HM 19C(2) overrides subsection (1)(a) and (b)(v).

                                      Compare
                                      • s HL 10(2)
                                      Notes
                                      • Section HM 12: 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 12 heading: amended (with effect on 1 April 2010), on (applying for the 2010–11 and later income years), by section 59(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                                      • Section HM 12(1) heading: inserted, on , by section 59(3) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                                      • Section HM 12(1)(b)(iii): amended, on , by section 87(1) (and see section 87(5) for application) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
                                      • Section HM 12(1)(b)(ivb): inserted, on , by section 218 of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                                      • Section HM 12(1)(b)(viii): amended (with effect on 1 April 2010), on (applying for the 2010–11 and later income years), by section 59(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                                      • Section HM 12(1)(b)(ix): added (with effect on 1 April 2010), on (applying for the 2010–11 and later income years), by section 59(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                                      • Section HM 12(1)(b)(ix): amended (with effect on 1 April 2012), on , by section 63 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
                                      • Section HM 12(1)(b)(x): inserted (with effect on 1 April 2012), on , by section 63 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
                                      • Section HM 12(1B) heading: inserted, on , by section 87(2) (and see section 87(5) for application) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
                                      • Section HM 12(1B): inserted, on , by section 87(2) (and see section 87(5) for application) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
                                      • Section HM 12(2) heading: added, on , by section 59(4) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                                      • Section HM 12(2): added, on , by section 59(4) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                                      • Section HM 12(2): amended (with effect on 29 August 2011), on , by section 91 of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                                      • Section HM 12(3) heading: added, 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 59(5) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                                      • Section HM 12(3): added, 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 59(5) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                                      • Section HM 12 list of defined terms foreign investment variable-rate PIE: inserted (with effect on 29 August 2011), on , by section 87 of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
                                      • Section HM 12 list of defined terms foreign investment zero-rate PIE: inserted (with effect on 29 August 2011), on , by section 87 of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
                                      • Section HM 12 list of defined terms foreign PIE equivalent: inserted, on , by section 87(4)(a) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
                                      • Section HM 12 list of defined terms licensed non-bank deposit taker: inserted, on , by section 87(4)(a) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
                                      • Section HM 12 list of defined terms PIE: inserted, on , by section 87(4)(a) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
                                      • Section HM 12 list of defined terms registered bank: inserted, on , by section 87(4)(a) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).