Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Taxation of certain entities - Portfolio investment entities - Elections and consequences

HM 73: Transition: provisional tax

You could also call this:

“Rules for tax changes when becoming a Portfolio Investment Entity (PIE)”

If you choose to become a PIE (Portfolio Investment Entity) in a tax year, your provisional tax might go up. Don’t worry though, you won’t have to pay any extra penalties or interest on this increase if:

  1. You made an estimate of your provisional tax before deciding to become a PIE, or
  2. You need to pay provisional tax within two months of becoming a PIE.

If you become a PIE and have to pay income tax because of selling and buying back your assets (as mentioned in section HM 75), you can pay it off over time. You can pay at least:

  1. One-third of what you owe in the year you become a PIE
  2. Half of what’s left in the next tax year
  3. The rest in the year after that

This gives you more time to pay the tax without getting into trouble.

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 It might be out of date or be missing some parts.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

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM2888878.

Topics:
Money and consumer rights > Taxes
Business > Industry rules
Previous

HM 72: When elections take effect, or

“Timing and rules for starting or stopping as a PIE”

Next

HM 74: Transition: entities with non-standard income years, or

“Rules for companies with special financial years becoming PIEs”

Part H Taxation of certain entities
Portfolio investment entities: Elections and consequences

HM 73Transition: provisional tax

  1. This section applies when an entity chooses to become a PIE in an income year and has an increased liability for provisional tax for the income year because of the election.

  2. The entity is not liable to pay any penalty or interest for which it would otherwise be liable for an inaccuracy arising from the increased liability in—

  3. an estimate of provisional tax made before the election:
    1. a payment of provisional tax due before the end of the 2-month period that starts when the election takes effect.

      1. An entity that becomes a PIE in a tax year and is liable to pay an amount of income tax because of the disposal and reacquisition referred to in section HM 75 may satisfy the tax liability by paying the Commissioner at least—

      2. one third of the liability in the tax year; and
        1. one half of the balance remaining after a payment under paragraph (a) in the tax year after that in which the entity became a PIE; and
          1. the balance owing after the payments under paragraphs (a) and (b) in the second tax year after that in which the entity became a PIE.

            Compare
            • s HL 14
            Notes
            • Section HM 73: 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).