NZ To Clarify PIE Timing Rules

by Mary Swire, Tax-News.com, Hong Kong

05 April 2010

New Zealand’s Revenue Minister, Peter Dunne, has stated that the government will introduce legislation later this year to clarify the timing rules for portfolio investment entities (PIEs) that wish to claim a tax deduction for credit impairments or doubtful debts.

The PIE rules have their own timing rule for income and tax deductions which allocates the PIE's income and deductions to the period when these amounts are reflected in its unit price, usually on a daily basis. This prevents the fund from being required to make complex provisions for future tax liabilities and deductions in the fund's unit price.

"Consultation with the industry indicates that there is considerable uncertainty over when a PIE can claim these deductions," he said. “The government intends to introduce several technical amendments to the PIE rules to clarify that a tax deduction for credit impairment or doubtful debt provisions is available when they apply a market valuation to their financial arrangements."

"This will ensure that PIEs are able to pro-rate other income and tax deductions such as fund administration costs to account for investors moving in and out of the PIE," he added. "This treatment is consistent with the approach for dealers under the financial arrangement rules, which allows them to adopt a market value option, which effectively allows a deduction for credit impairments which impact on the market price.”

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