Dunne: new rules for non-resident PIE investment

New tax rules announced today by Revenue Minister Peter Dunne will remove a barrier to non-residents investing into New Zealand.

The changes are contained in a Supplementary Order Paper to the Taxation (Tax Administration and Remedial Matters) Bill 2010 released today by Mr Dunne.

He said that the rules for non-resident investors in PIEs will be aligned with those for direct investment to ensure fairness of tax treatment.

Mr Dunne said that the current rules mean that non-residents investing into Portfolio Investment Entities (PIEs) are taxed at 28% on all the income that they earn from a PIE, whether foreign or New Zealand-sourced.

“This means that these investors are over-taxed in comparison with how they would be taxed if they had invested directly.”

He said that this over-taxation had been identified as a barrier to the development of New Zealand's fund management industry, particularly in the case of direct investment into foreign assets by non-residents.

“The International Fund Services Development Group told us that this situation discourages non-residents from investing in New Zealand PIEs. It’s a situation we needed to rectify.”

Mr Dunne said that the rules are designed to be as simple as possible for PIEs to administer, while still providing that non-residents pay the right amount of tax on their investments.

The new rules introduce two new categories of PIEs. Details of these are on the Inland Revenue policy website taxpolicy.ird.govt.nz/

Mr Dunne said he expects the legislation introducing the new rules to be enacted later this year.