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Income Tax Act 2007

Taxation of certain entities - Portfolio investment entities - Using tax credits

HM 55G: Allowable amounts and thresholds for income with New Zealand source

You could also call this:

“Limits on New Zealand income sources for certain investment funds”

When you’re using tax credits, there are rules about how much income from New Zealand sources a foreign investment zero-rate PIE can have. A PIE is a type of investment fund.

You can have interest income from financial deals that last 90 days or less. But the total value of these deals can’t be more than 5% of all the PIE’s investments.

You can also get dividends from companies in New Zealand. But the total value of all the shares the PIE owns in New Zealand companies can’t be more than 1% of all the PIE’s investments.

The PIE can have income from financial arrangements that aren’t interest-bearing, like some types of contracts, if they’re related to the PIE’s overseas investments.

Lastly, the PIE can have income that comes from another foreign investment zero-rate PIE or a PIE that meets certain requirements set out in section HM 19B(1).

These rules help make sure that foreign investment zero-rate PIEs mainly invest in things outside of New Zealand.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM4025517.

Topics:
Money and consumer rights > Taxes
Business > Industry rules
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HM 55FB: Notified foreign investors and tax credits for supplementary dividends, or

“Foreign investors in PIEs may get extra dividend payments from NZ companies”

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HM 55H: Treatment when certain requirements for foreign investment PIEs not met, or

“Rules for foreign investment PIEs that don't meet certain requirements”

Part H Taxation of certain entities
Portfolio investment entities: Using tax credits

HM 55GAllowable amounts and thresholds for income with New Zealand source

  1. For the purposes of sections HM 19B and HM 55H, and schedule 6 (Prescribed rates: PIE investments and retirement scheme contributions) and for a foreign investment zero-rate PIE, the allowable amounts of income that have a source in New Zealand and the thresholds applying to the amounts are—

  2. interest income from financial arrangements with no term or a term of 90 days or less, for which the total value of the financial arrangements must not be more than 5% of the total value of the PIE's investments, determined without reference to an amount described in paragraph (c):
    1. a dividend paid by a company resident in New Zealand, if the total value of all the shares held by the PIE in companies resident in New Zealand is not more than 1% of the total value of the PIE's investments:
      1. income from a derivative instrument or other non-interest bearing financial arrangement that is related to the PIE's foreign investments:
        1. attributed PIE income from a foreign investment zero-rate PIE or a PIE that meets the requirements of section HM 19B(1).

          Notes
          • Section HM 55G: 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 79(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).