By Hayes Knight – 7 April 2011

The Government has announced that new tax rules will be legislated to remove a barrier to non-residents investing into New Zealand.

Under the current rules, 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 non-resident investors are over-taxed in comparison with how they would be taxed if they had invested directly.

The Government says 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.

In essence, two new categories of PIEs will be introduced that entities can elect into. This gives both PIEs and non-resident investors flexibility to invest into foreign or New Zealand assets, and allows them to choose the tax treatment of their non-resident investors. More details of the new rules can be found at http://taxpolicy.ird.govt.nz

Please contact Phil Barlow or Shelley-ann Brinkley if you would like to know more about PIEs or the new rules discussed above.