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Income Tax Act 2007

Taxation of certain entities - Portfolio investment entities - Exit rules

HM 25: When entity no longer meets investment or investor requirements

You could also call this:

“Rules for keeping your PIE status and what happens if you break them”

You might lose your status as a PIE (Portfolio Investment Entity) if you stop meeting certain rules. This can happen at the end of a three-month period (called a quarter). If you or a group of your investors don’t follow the rules in sections HM 11 to HM 15, and it’s a big problem that you could have prevented, you have until the end of the next quarter to fix it.

If you can’t fix the problem, you’ll lose your PIE status. This will happen on the first day of the next quarter if the problem was serious and you could have stopped it. If not, it will happen on the first day of the quarter after that.

There are two times when these rules don’t apply. First, if you’re a new PIE or you’ve just formed a new investor group, you have a bit more time to get things right. Second, if you’re planning to close down soon, you also have some extra time.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM2888758.

Topics:
Money and consumer rights > Taxes
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HM 24: Immediate loss of PIE status, or

“When a PIE immediately loses its status for not following certain rules”

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HM 26: Starting life insurance business, or

“PIEs lose their status when they begin offering life insurance”

Part H Taxation of certain entities
Portfolio investment entities: Exit rules

HM 25When entity no longer meets investment or investor requirements

  1. An entity loses PIE status if,—

  2. on the last day of a quarter (the first quarter),—
    1. the entity no longer meets a requirement of sections HM 11 to HM 13; or
      1. an investor class of the entity no longer meets a requirement of sections HM 13 to HM 15; and
      2. the failure to meet the requirements—
        1. is significant and is within the control of the entity:
          1. is not remedied by the last day of the next quarter (the second quarter).

          2. The date of loss of PIE status is—

          3. when subsection (1)(b)(i) applies, the first day of the second quarter:
            1. when subsection (1)(b)(i) does not apply, the first day of the third quarter.

              1. Subsection (1) does not apply if—

              2. the start of the first quarter would be within 6 months plus 1 day of the date on which the entity becomes a PIE, or the investor class is formed; or
                1. the first quarter ends within 3 months before an announcement by the entity to its investors that it, or the relevant investor class, is winding up within 12 months of the announcement.

                  Compare
                  • s HL 4(2)
                  Notes
                  • Section HM 25: 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 25(2)(a): amended (with effect on 1 April 2010), on (applying for the 2010–11 and later income years), by section 65(1)(a) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                  • Section HM 25(2)(b): amended (with effect on 1 April 2010), on (applying for the 2010–11 and later income years), by section 65(1)(b) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                  • Section HM 25(3)(b): amended (with effect on 1 April 2010), on (applying for the 2010–11 and later income years), by section 67(1) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).