Portfolio Investment Entity

The question here is whether the taxpayer needs to pay tax on income earning from Portfolio Investment Entity (PIE).

PIE is an entity that invests the contributions from investors in different types of investments. It came in to existence from 01 October 2007 under part HM of the Income Tax Act 2007.

PIE was mainly introduced to ensure the tax system is neutral. People with low income do not pay high tax. Previously the managed funds were taxed at the highest rate for example 33%, and if low income group people invest in those funds they end up paying more tax. The whole process of investing in managed funds discourage people to invest. In order to ensure people invest in NZ economy, and maintain neutrality of tax system PIE was introduced.

Generally, everyone needs to pay tax on income and PIE funds also need to pay tax. But, the tax rates could be lower, people are taxed at the prescribed rate of tax ( 10.5%, 17.5%, and 28%) with maximum tax being 28%, and people with lower income will choose lower tax rate. If you need help to verify your rates, please seek professional advice.

Disclaimer: The following answer is based on general principles only. The facts and background information of particular cases always need to be considered carefully as it varies from case to case, and it may be necessary to seek professional advice.

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