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HM 44: Provisional tax calculation option
or “How PIEs can choose to calculate and pay provisional tax for the whole year”
You could also call this:

“How foreign investment PIEs can choose to calculate tax on certain dividends paid to overseas investors”

When you’re dealing with a foreign investment PIE (Portfolio Investment Entity), there are special rules for how they handle certain dividends and pay tax on them. Here’s what you need to know:

If the PIE gets a dividend that’s not fully imputed from a New Zealand company, and then pays some or all of that dividend to a foreign investor, the PIE can choose to calculate and pay tax on it differently. They can use the rules for withholding tax on non-resident passive income instead of their usual tax rules.

The same thing can happen if the PIE gets a dividend with imputation credits and a related supplementary dividend from a New Zealand company. If they pay this to a foreign investor who meets certain requirements, they can also choose to use the withholding tax rules.

When the PIE uses this option, they don’t include these dividend amounts in their usual calculations for foreign investors. Instead, the normal rules for non-resident withholding tax apply to the amount paid.

It’s important to note that even though some PIE distributions are usually not taxable for the investor, in this case, the amount isn’t considered excluded income for the foreign investor.

Lastly, when a PIE gets a dividend and related supplementary dividend as described, they’re treated as if they were allocated on the date that determines who is entitled to the dividend based on share ownership.

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Next up: HM 45: Voluntary payments

or “Explaining when multi-rate PIEs can make voluntary tax payments for investors”
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Part H Taxation of certain entities
Portfolio investment entities: Calculating and paying tax liability

HM 44BNRWT calculation option

  1. This section applies when—

  2. a foreign investment PIE—
    1. derives a dividend that is not fully imputed from a company resident in New Zealand; and
      1. pays an amount that represents some or all of the amount of the dividend to a notified foreign investor in the PIE by the date on which the PIE is required to pay its income tax liability under section HM 42 or HM 43, as applicable; and
      2. the PIE chooses to calculate and pay the tax liability in relation to the amount under subpart RF (Withholding tax on non-resident passive income).

        1. This section also applies when—

        2. a foreign investment PIE—
          1. derives a dividend with imputation credits attached from a company resident in New Zealand together with a related supplementary dividend; and
            1. has, as an investor, a notified foreign investor who meets the requirements of section LP 2(1)(a) (Tax credits for supplementary dividends); and
              1. pays the investor an amount that represents the total amount of the dividend and supplementary dividend that would be attributed to the investor in the absence of subsection (2); and
                1. pays the amount by the date on which the PIE is required to pay its income tax liability under section HM 42 or HM 43, as applicable; and
                2. the PIE chooses to calculate and pay the tax liability in relation to the amount under subpart RF.

                  1. In determining the net amount for notified foreign investors under sections HM 35 and HM 36, to the extent to which the amount represents either an unimputed portion of the dividend, or a dividend together with a related supplementary dividend, as applicable, the amount is not included in—

                  2. the item assessable income in section HM 35(3):
                    1. the item income in section HM 36(3).

                      1. The NRWT rules apply to the amount paid to the extent to which the amount represents either an unimputed portion of the dividend, or a dividend together with a related supplementary dividend, as applicable.

                      2. Despite section CX 56B (Distributions to investors in multi-rate PIEs), the amount is not excluded income of the notified foreign investor.

                      3. When a foreign investment PIE derives a dividend and related supplementary dividend as described in subsection (1B), the allocation rule set out in section HM 35(8) does not apply. The dividend and related supplementary dividend are treated as having been allocated on the date on which ownership of the shares determines a legal entitlement to the dividend.

                      Notes
                      • Section HM 44B: 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 74(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                      • Section HM 44B(1B) heading: inserted, on (applying for the 2013–14 and later income years), by section 103(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                      • Section HM 44B(1B): inserted, on (applying for the 2013–14 and later income years), by section 103(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                      • Section HM 44B(2): amended, on (applying for the 2013–14 and later income years), by section 103(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                      • Section HM 44B(3): amended, on (applying for the 2013–14 and later income years), by section 103(3) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                      • Section HM 44B(5) heading: inserted, on (applying for the 2013–14 and later income years), by section 103(4) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                      • Section HM 44B(5): inserted, on (applying for the 2013–14 and later income years), by section 103(4) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                      • Section HM 44B list of defined terms supplementary dividend: inserted, on , by section 103(5) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).