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Income Tax Act 2007

Deductions - Specific rules for expenditure types

DB 54B: Expenditure incurred by foreign investment PIEs

You could also call this:

“Special tax rules for certain investments in foreign investment PIEs”

This section talks about special rules for foreign investment PIEs. A PIE is a type of investment fund in New Zealand. When a foreign investment PIE spends money or has a loss while making money for certain investors, it can’t claim that spending or loss as a tax deduction.

This rule applies to two types of investors:

  1. Notified foreign investors in the PIE
  2. Transitional residents who have chosen to use a specific tax rate

The law says that the PIE can’t claim a deduction for any money spent or losses related to these investors. This rule is stronger than other rules that might usually allow companies to claim interest as a deduction. It also overrides the general permission for deductions in tax law.

You should know that a “notified foreign investor” is someone from another country who has told the PIE about their foreign status. A “transitional resident” is someone who has recently moved to New Zealand and gets some tax benefits for a while.

This rule helps make sure that foreign investment PIEs treat certain investors differently for tax purposes.

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 It might be out of date or be missing some parts.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=DLM3996903.

Topics:
Money and consumer rights > Taxes
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DB 54: No deductions for fees relating to interests in multi-rate PIEs, or

“You can't claim tax deductions for fees paid to multi-rate PIE investment funds”

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DB 54C: Certain expenditure incurred by foreign PIE equivalents, or

“Foreign investment entities can't deduct expenses from certain income”

Part D Deductions
Specific rules for expenditure types

DB 54BExpenditure incurred by foreign investment PIEs

  1. This section applies when a foreign investment PIE incurs expenditure or loss in deriving income attributable to—

  2. a notified foreign investor in the PIE:
    1. a transitional resident who has chosen under section HM 55D(9) (Requirements for investors in foreign investment PIEs) to use the specified prescribed investor rate.

      1. The PIE is denied a deduction for the amount of the expenditure or loss.

      2. This section overrides section DB 7 (Interest: most companies need no nexus with income).

      3. This section overrides the general permission.

      Notes
      • Section DB 54B: 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 16(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
      • Section DB 54B(1): replaced, on , by section 22(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
      • Section DB 54B list of defined terms prescribed investor rate: inserted, on , by section 22(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
      • Section DB 54B list of defined terms transitional resident: inserted, on , by section 22(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).