Hon Peter Dunne
Minister of Revenue
MEDIA STATEMENT
Dunne: views sought on taxation of foreign funds in PIEs
A tax policy issues paper released today seeks feedback on suggested changes to remove an anomaly that results in overseas investors being over-taxed when investing in New Zealand portfolio entities, Revenue Minister Peter Dunne has announced.
"Under New Zealand tax law, residents are taxed on both their domestic and foreign-sourced income, while non-residents are taxed only on their New Zealand-sourced income.
"However, non-residents investing in foreign assets through a portfolio investment entity or PIE are currently taxed as if they were New Zealand residents and are taxed both on their New Zealand-sourced income and income from their offshore activities.
"This creates a potential disincentive for foreign investment in New Zealand's financial services industry," Mr Dunne said.
"Last year's Capital Markets Development Taskforce report noted that there is considerable potential for New Zealand to pursue opportunities to establish itself as an exporter of back-office services for funds management firms.
"With the Government's announcement last week of an independent International Fund Services Development Group to consider what would be required to establish an international fund services industry or hub in New Zealand, it is timely to consider how this tax problem might be resolved," Mr Dunne said.
Industry views are sought on two possible options for exempting non-residents investing in PIEs.
The issues paper, Allowing a zero percent tax rate for non-residents investing in a PIE is available at www.taxpolicy.ird.govt.nz. Submissions close on 4 June 2010.
Mark Stewart | Press Secretary | Office of Hon Peter Dunne
Cell +64 21 243 6985