PIE changes: PIE tax annual assessment process

  • Legal update

    26 March 2021

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Inland Revenue has announced that from the 2021 tax year changes will be made to ensure consistency in the taxation of Portfolio Investment Entity (PIE) income.

The general guidance is available online here.

Who needs to read it? Why?

Banks and financial institutions (PIE Providers) and individuals with PIE income.

What does it cover?

The scope of the changes announced includes amendments to the PIE income tax rules, including that, going forward:

  • All resident individuals will receive a PIE tax calculation in their income tax return (IR3) or will receive automatically issued income tax assessments.
  • Individuals can claim a credit for overpaid tax on PIE income. Previously, individuals were only required to include PIE income in their tax return where tax was under-deducted due to the use of a Prescribed Investor Rate (PIR) that was too low.
  • When a customer uses an incorrect PIR, Inland Revenue will make a separate PIE tax calculation using the PIR the customer should have used. However, if Inland Revenue calculates a PIE tax debit where a customer has used the correct PIR, the debit will be waived.
  • The due date for submitting PIE annual reconciliation and investor certificates is now 15 May.
Our view

The income tax treatment of PIE income was inconsistent and complex. Inland Revenue’s changes will give PIE Providers and individuals with PIE income clarity regarding their compliance obligations and should result in a fairer assessment of PIE tax.

PIE Providers have borne the brunt of these changes as systems have needed to be updated. They may now notice an increase in customer communication requesting that PIRs are updated.

What next?

Inland Revenue will be contacting customers from 20 April who have earned PIE income in the past to explain the changes.

If you have any questions in relation to Inland Revenue’s new PIE assessment rules or any other tax related queries, please contact one of our experts.