Other amendments to the PIE rules

Section HL 9 of the Income Tax Act 2004; sections HL 9, HM 21, HM 22(1), HM 37(3) and schedule 29 of the Income Tax Act 2007

A number of amendments have been made to the tax rules for portfolio investment entities (PIEs). These amendments are to ensure the PIE rules operate effectively and as intended.

Key features

Delay in the repeal of section HM 37(3)

The repeal of section HM 37(3), which sets out how a PIE should treat fund withdrawal tax (FWT), has been delayed until 1 April 2013. The FWT rules are generally being repealed on 1 April 2011; however, it was necessary to delay the repeal of this specific provision as, in certain circumstances, a PIE may need to rely on the provision up until 31 March 2013.

Investor interest requirement for listed PIEs

Section HM 21 has been amended to provide that an investor in a listed PIE that is itself widely held is able to hold up to 100% of the PIE. Corresponding amendments have also been made to sections HL 9 of the Income Tax Act 2004 and HL 9 of the Income Tax Act 2007. This matches the treatment afforded to multi-rate PIEs. The entities that are considered widely held for the purposes of this rule are listed in schedule 29.

The amendments apply from the beginning of the PIE rules, 1 October 2007.

Change to schedule 29

The reference to "Auckland Regional Holdings" in schedule 29 has been replaced with "Auckland Council". This reflects changes made during Auckland’s council restructuring when Auckland Regional Holdings was disestablished and its investment assets transferred to Auckland Council. The change ensures that these investment assets continue to be exempt from the requirements of sections HM 14(1) and HM 15 despite the restructure.

The amendment applies from 1 November 2010, the date the Auckland Council restructure took place.

Amendment to section HM 22

Section HM 22 has been amended to clarify that, for the purposes of determining whether an entity is a foreign PIE equivalent or an entity that qualifies for PIE status, the exemptions provided by section HM 22(1) can be taken into account.

The amendment applies from 1 April 2010.