New Zealand: Financial hub law change

Last Updated: 7 April 2011
Article by Casey Plunket and Tim Williams

Most Read Contributor in New Zealand, September 2016

PIE investment products will be available to foreign investors on a tax-effective basis under a Supplementary Order Paper (SOP) introduced by the Government yesterday (5 April 2011).

The legislation will apply from enactment to some products (which could be as early as June or July 2011) and will be fully applicable from the beginning of the 2012-13 year.

This Brief Counsel summarises the change, which is both detailed and complex.  We urge industry players to consider the SOP carefully as it may contain some fish-hooks.


The SOP is to be welcomed, as the latest step in a process to facilitate the development of New Zealand as a financial hub. The legislation has been widely consulted on, and accordingly should be fit for purpose in most respects.  However, it almost certainly contains difficulties which will only be discovered on close examination. It is therefore important that it be subjected to expert scrutiny to ensure that the legislation that is enacted will achieve its purpose. 

New tax rates for PIE income attributable to foreign investors

The key job of the legislation is to fix the current anomaly, where all PIE income attributable to foreign investors is taxed at 28%.  PIE income attributable to foreign investors will be taxed at 0% if the income is:

  • foreign source income
  • a fully imputed dividend from a New Zealand company (this is already the case)
  • New Zealand source interest or dividend income derived by a PIE which:
    • has less than 5% of its assets invested in New Zealand debt
    • has less than 1% of its assets invested in New Zealand share
    • derives no other types of New Zealand source income.

For PIEs which don't meet these requirements, New Zealand source financial arrangement income (including both interest and income from derivatives) will be taxed at 1.44%, and New Zealand source dividends will be taxed at either:

  • 0% (if fully imputed)
  • 15% (if unimputed and the investor is resident of a country with which New Zealand has a tax treaty)
  • 30% otherwise (which is higher than the current 28% rate). 

The legislation appears to have been drafted on the basis that PIEs which qualify for the 0% rate on all income can apply that rate from the date that the legislation becomes law. PIEs which have to apply the different rates can only do so from the beginning of the 2012-13 year.

New rates calculated on gross income with no credits

While the different rates applying to New Zealand source financial arrangement income, New Zealand source dividend income, and foreign income, will create some complexity, there is at least no need for the PIE to apportion expenses or tax credits between the different types of income. All of the taxes are imposed on a gross basis, just as they would be if the income were derived directly.

Optional rule for unimputed dividends

The legislation does allow the PIE to pay the tax on unimputed dividends as NRWT in certain circumstances, in order to allow foreign investors to claim credits for these taxes.

Only "foreign investment PIEs" apply the new rates

These rates are available only to PIEs which:

  • choose to be treated as "foreign investment PIEs", and
  • meet certain asset qualifications. Essentially, these are either that:
    • the PIE has no interests in New Zealand land or in a land investment company (broadly, a company whose assets consist of land to 90% or more), or
    • the PIE has less than 5% of its assets invested in New Zealand debt and less than 1% of its assets invested in New Zealand equity (investment in other PIEs is permitted, so long as those PIEs derive only foreign source income or interest income from de minimis New Zealand debt).

The name "foreign investment PIE" is perhaps unfortunate, since it is perfectly possible for a foreign investment PIE to have no foreign investments at all.

PIEs which don't choose to be treated as foreign investment PIEs will continue to apply the 28% rate, in respect to their foreign investors.

Evidence required of foreign investor's identity

In order for a PIE to apply these different rates to an investor's income, the investor must be a "notified foreign investor". This requires them to provide the PIE with their:

  • full name
  • date of birth (if applicable)
  • home address in the country where they are tax resident, and
  • tax file number in the country where they reside, and in New Zealand if they have one.

PIEs may also wish to confirm that the investor is not a Controlled Foreign Company (CFC) or a trustee of a trust subject to New Zealand tax on its income, as these persons are not entitled to be notified foreign investors.


Chapman Tripp supports this change and has long argued for it.  

The new rates will make PIEs more attractive investment vehicles for foreign investors. They will also encourage Kiwis with Kiwisaver accounts to leave their money in their Kiwisaver account when they leave New Zealand to work overseas.  If the Kiwisaver provider has elected into the new regime, their money will generate income subject to a much lower rate of New Zealand tax than is currently the case. It is also encouraging that the rules can be implemented in large part from the date of enactment.

However, there are a number of aspects where the legislation may require amendment, preferably before enactment.  For example, the treatment of derivative contracts entered into with New Zealand counterparties does not seem to have been properly thought through.  Nor is there any reason why a foreign investment PIE could not hold interests in a company whose assets are 90% or more of land.


Although submissions have already been heard on the Bill to which the SOP is attached, we hope the Finance and Expenditure Committee will call for submissions on the SOP also. This would provide a structured opportunity for feedback and amendment. If that is not the case, it may be necessary to discuss concerns directly with officials.

The information in this article is for informative purposes only and should not be relied on as legal advice. Please contact Chapman Tripp for advice tailored to your situation.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.