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Income Tax Act 2007

Taxation of certain entities - Portfolio investment entities - Formation losses

HM 68: When formation losses carried forward are less than 5% of formation investment value

You could also call this:

“Treatment of small formation losses for Portfolio Investment Entities”

When you’re dealing with a PIE (Portfolio Investment Entity), sometimes you might have something called a formation loss. This is a kind of loss that happened when the PIE was first set up. If the total amount of this formation loss that’s been carried forward is less than 5% of the total value of all the PIE’s investments, you can do something special.

You can allocate the part of the formation loss that hasn’t been used yet to a specific time period. This happens when you’re working out how much tax needs to be paid on the investments in that time period. You can do this when the PIE first becomes a PIE, or when it changes how it calculates its tax from one method to another.

To understand more about how to calculate the taxable amount for investors, you can look at section HM 35(5).

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM2888865.

Topics:
Money and consumer rights > Taxes
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HM 67: Formation losses carried forward to first quarter, or

“Carrying forward company losses when becoming or changing type of investment entity”

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HM 69: When formation losses carried forward are 5% or more of formation investment value: 3-year spread, or

“Spreading large PIE formation losses over three years for tax calculations”

Part H Taxation of certain entities
Portfolio investment entities: Formation losses

HM 68When formation losses carried forward are less than 5% of formation investment value

  1. If the total amount of formation loss carried forward under section HM 67 is less than 5% of the total market value of the PIE’s investments at the time it either becomes a PIE or changes its calculation option from the provisional tax calculation option to the exit calculation or quarterly calculation option, it may allocate to an attribution period the amount not already allocated, when calculating under section HM 35(5) the taxable amount of an investor class for the attribution period.

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  • s HL 30(3)
Notes
  • Section HM 68: 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 68: amended, on , by section 134(1) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
  • Section HM 68 list of defined terms provisional tax: inserted, on , by section 134(2) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
  • Section HM 68 list of defined terms taxable amount: repealed, on , by section 243 of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).