A Portfolio Investment Entity (PIE) is a tax-efficient investment vehicle introduced in New Zealand under the Income Tax Act 2007. It allows pooled funds—such as managed funds, KiwiSaver schemes, and some exchange-traded funds (ETFs)—to be taxed at the investor’s Prescribed Investor Rate (PIR) rather than at the fund or corporate level. This structure avoids double taxation and aligns tax liability with the individual’s income.
Unlike traditional companies or trusts, Portfolio Investment Entity Meaning “flow-through” entities. Investment income (dividends, interest, capital gains) is attributed directly to investors and taxed only once—at their PIR. The PIE calculates, withholds, and pays tax to Inland Revenue (IRD) on behalf of investors, simplifying compliance .
As of 2025, over NZ$200 billion in assets are held in PIE-compliant funds, making it the dominant structure for retail and institutional managed investments in New Zealand.
How PIE Taxation Works: The Prescribed Investor Rate (PIR)
The core advantage of a PIE is the Prescribed Investor Rate (PIR)—a personalized tax rate capped at 28%, even for high-income earners.
PIR Tiers (2025)
| Annual Income (Last 2 Years) | PIR |
|---|---|
| $0 – $14,000 | 10.5% |
| $14,001 – $48,000 | 17.5% |
| $48,001 – $70,000 | 28% |
| $70,001 – $180,000 | 28% |
| Over $180,000 | 28% |
Note: From 1 April 2025, the top PIR remains 28% despite personal tax rates rising to 39% for income over $180,000.
Investors notify their PIE provider of their correct PIR. If over-notified, excess tax is refunded via IRD; if under-notified, a penalty applies.
Types of Portfolio Investment Entities
1. Multi-Rate PIE (MRP)
The most common type. Each investor is taxed at their individual PIR. Examples: Most KiwiSaver funds, retail managed funds (e.g., Fisher Funds, Milford, ANZ Investments). Best for: Mixed investor bases (low to high income).
2. Single-Rate PIE (SRP)
All investors taxed at a single fixed rate (usually 28%). Examples: Some listed PIEs on NZX (e.g., Smartshares ETFs). Best for: High-income or non-resident investors.
3. Listed PIEs
Publicly traded on the NZX. Must comply with NZX rules and PIE tax regime. Examples: Smartshares NZ Top 50 (FNZ), NZ Bond Fund.
4. Foreign Investment PIEs
Allow non-residents to invest in NZ assets with 0% tax on foreign-sourced income if conditions met.
Eligibility and Compliance for PIE Status
To qualify as a PIE, an entity must:
- Be a New Zealand resident entity (company, unit trust, or superannuation fund).
- Have at least 20 investors OR one investor with <20% holding.
- Invest primarily in financial assets (shares, bonds, bank deposits).
- Elect PIE status with IRD.
- File quarterly tax returns and attribute income to investors.
Exclusions: Property funds with >50% in land, life insurance funds, and some superannuation schemes.
Tax Advantages of PIEs vs. Direct Investment
| Scenario | Direct Shares | PIE Fund |
|---|---|---|
| Dividend (NZ company, fully imputed) | 0% tax (imputation credits) | 0% tax |
| Interest income | Taxed at marginal rate (up to 39%) | Taxed at PIR (max 28%) |
| Overseas dividends | FIF rules + 33–39% tax | PIR only (max 28%) |
| Capital gains (NZ/AU shares) | Generally untaxed | Untaxed in PIE |
| Foreign shares (FIF) | Complex FDR/CVR calculations | PIE handles, taxed at PIR |
| Administration | Investor files own tax | PIE pays on behalf |
Key Win: PIEs cap tax at 28% and simplify compliance.
Benefits of Investing in PIEs
- Tax Efficiency: Lower effective tax for income >$70,000.
- No FIF Complexity: PIEs manage Foreign Investment Fund rules.
- Automatic Tax Handling: No end-of-year tax filings for PIE income.
- Reinvestment: Tax paid quarterly from fund, not investor’s pocket.
- KiwiSaver Default: All KiwiSaver funds are PIEs.
- Portfolio Diversification: Access global markets via one investment.
Risks and Limitations
- Locked PIR: Cannot claim deductions or losses outside the fund.
- No Imputation Credits: Fully imputed NZ dividends offer no extra benefit.
- Fees: Management fees (0.3%–1.5% p.a.) reduce returns.
- Market Risk: Subject to asset performance.
- PIR Errors: Incorrect PIR leads to IRD penalties (up to 150% of underpaid tax).
How to Invest in a PIE
- Choose a Fund: KiwiSaver, retail fund, or NZX-listed PIE.
- Complete PIR Form: Declare income for last 2 tax years.
- Invest: Via bank, broker, or fund manager platform.
- Monitor: Receive quarterly statements; update PIR if income changes.
PIEs in 2025: Trends and Outlook
- Rise of Zero-Fee Index PIEs: Smartshares and Kernel offer <0.2% fee funds.
- ESG Integration: 60%+ of new PIE inflows target sustainable funds.
- Digital Onboarding: Apps like Hatch and Sharesies streamline PIE access.
- IRD Scrutiny: Increased audits on PIR accuracy.
Conclusion
A Portfolio Investment Entity (PIE) is more than a tax structure—it’s the backbone of modern investing in New Zealand. By capping tax at 28%, automating compliance, and enabling diversified exposure, PIEs outperform direct investing for most retail participants. Whether saving for retirement via KiwiSaver or building wealth through managed funds, understanding PIEs is essential. Choose the right type (multi-rate or listed), verify your PIR annually, and let the tax-efficient engine work for you. In 2025, PIEs remain the smartest way to grow wealth in a high-tax environment.