What is Resident Withholding Tax?

Resident withholding tax (RWT) is tax deducted on investment income (e.g. interest on deposits and dividends from companies) paid to New Zealand tax residents.

Paying RWT means you have paid tax as you receive income so you should have less tax to pay when you file your tax return at the end of a tax year. If you did not pay RWT you would likely have a larger tax bill at the end of a tax year.

RWT is calculated using your RWT rate. Your RWT rate is determined by your annual income.

We ask for details of your RWT rate in our client agreement when you set up your account. However, you should contact us if your RWT changes so we can ensure any tax is deducted at the correct rate.

RWT is deducted from the income payments at source (e.g. by the bank or company paying the dividend or interest) at the time of any payment.


Tax rate from 1 April 2021

You should contact us if your RWT changes so we can ensure we deduct the tax at the correct rate.

Disclaimer: The information provided on or via this website is for information only and should not be used as a substitute for any form of advice. Craigs Investment Partners are not tax specialists and we recommend individuals seek specialist advice from their usual taxation adviser.

What is Portfolio Investment Entity (PIE) Tax?

Portfolio Investment Entity (PIE) Tax is tax deducted on investment income earned by individual investors in managed funds and companies which are registered as PIEs.

Paying PIE tax means you have paid tax on the investment income you have earned within the PIE. Usually PIE tax is a final tax, so you do not need to include details of the investment income you have earned of the tax deducted in your annual tax return.

What is a Prescribed Investor Rate (PIR)?

Prescribed Investor Rate (PIR) is the rate at which tax is deducted from investment income earned in a PIE. Each individual investor has a PIR, and PIRs will differ between investors and may change for an investor over time.

Each individual investor within a PIE has taxable investment income attributed to their unit holdings. Tax is deducted for each investor using the individuals PIR rate. Your PIR is determined by your annual income, or your income in either of the last two tax years.

We ask for details of your PIR in our client agreement when you set up your account. However, you should contact us if your PIR changes so we can ensure any PIE tax is deducted at the correct rate.

PIE tax is deducted by the manager of the PIE whenever you sell units in the PIE or at the end of each tax year.

There are currently four rates: 0%, 10.5%, 17.5% and 28%. This may differ from your income tax rate (marginal tax rate).

A PIR is required if you have invested in, or are considering investing in, a Portfolio Investment Entity (PIE)

Before you invest in a portfolio investment entity (PIE) such as a KiwiSaver scheme, you will need to provide your IRD number and prescribed investor rate (PIR). Your PIR is used to calculate the tax on income derived on your KiwiSaver account.

PIR chart

If you confirm a PIR at 10.5% or 17.5%, but it should in fact be 28%, then you will have to file a tax return and pay the additional tax to the Inland Revenue (IRD penalties may apply).

If you are entitled to a PIR of 10.5% or 17.5% but have been using the 28% PIR, then the additional tax you have paid is not reimbursed. You must notify Craigs Investment Partners of your PIR or if your PIR changes.

What is the Fair Dividend Rate (FDR)?

The Fair Dividend Rate (FDR) rules were introduced in April 2007. FDR is a method of calculating the taxable income on global shares and foreign unit trusts, they are a component of the Foreign Investment Fund (FIF) tax income determination rules and sit alongside the Comparative Value (CV) method.

Under FDR, global shares are deemed to generate ‘dividend income’ equal to 5% of the opening market value of the global share portfolio. In addition to this ‘dividend’ FDR assessable income includes a component of any realised gains on ‘quick sales’ undertaken throughout the tax year.

There are exemptions to the definition of global shares, the most significant of which is investment in shares listed on the Australian All Ordinaries Index (the ASX) that meet certain criteria.

There is a $50,000 cost de-minimise test for individual, personal investors, through which the FDR rules only apply to individual or joint investors who have global share portfolios that cost greater than NZ$50,000 per investor (e.g. cost de-minimise of $100,000 for a portfolio jointly held by a husband and wife).

Individual or joint holders who do not meet the de-minimise can elect to apply FDR.

This de-minimise exemption does not extend to:

  • Family Trusts;
  • Unit Trusts;
  • Pooled Funds (including PIEs); or
  • Companies

These other ‘entities’ are taxed under the FIF rules, irrespective of the cost of their global share portfolio.

If an individual has a global share portfolio which does not meet the de-minimise cost (i.e. less than NZ$50,000 or $100,000 for a joint holding) at the beginning of a tax year (e.g. 1 April) then they must include details of their foreign income in their tax returns. The Comparative Value Method may apply to these investments.

A ‘portfolio’ investment is a holding that represents less than 10% of the shares in a single company.



The concept of FDR is that investors are assumed to have earned an income of 5% of the opening value of the total global share portfolio held at the start of that tax year (1 April). There are two components to the FDR income calculation:

  1. A deemed dividend
  2. A quick sale gain or loss

Deemed Dividends

For individuals and family trusts

Taxable income will be the lower of:

  • The opening balance of your global share portfolio multiplied by 5%, plus any quick sale adjustment; or
  • Your actual return over the year (as calculated using the CV method).

If your actual return for a year is a loss, your FDR taxable income is zero.

All FDR calculations are based on the NZ Dollar Value of the global share investments.


  • Global share portfolio = $100,000 at the start of the year with no quick sales.
  • Taxable income deemed = $5,000 (5% of $100,000).
  • Tax levied on this amount at the investors personal tax rate (e.g. for a 33% Marginal Tax Payer $1,650, being (33% of $5000).

This is the only tax to pay under the FDR, there is no further tax to pay if the global shares are subsequently sold during the year. Furthermore, there is no further tax to pay if additional shares are purchased during the year and held at the year end.

For other entities (excluding family trusts)

Taxable income is your opening balance multiplied by 5%, plus any quick sale adjustment.

There is no ‘relief’ for returns below 5% for investors who are not individuals, or family trusts.

Quick sale adjustments

Quick Sales only apply to investors who have bought and then sold a global share during the investors tax year.

Your taxable income on quick sales is the lower of:

  • actual gain; or
  • 5% of the average cost of shares sold (known as peak holding adjustment).



How are my global shares taxed if I am not taxed under FDR?

You will need to include any income from the global shares in your annual tax return. Please note, some international investments will be taxed using the CV method.

What if I invested in global shares after the start of the year (e.g. 1 April 2017)?

If you purchased global shares after 1 April, and the total cost of all your FIF investments increase to more than NZ$50,000 as a result of the purchase, you will be subject to the FIF rules (and thus FDR) for that year.

Your taxable income will be based on the cost of your global share portfolio on 1 April 2017. If you held no global shares at this time, then your FDR liability will be nil (i.e. opening balance of zero multiplied by 5%).

If you subsequently sell these shares before the end of the tax year (31 March 2018), the quick sale rules will apply. However, if the shares are held for the rest of the year, any dividends received from these global shares should not be included in your tax return.

What if I bought and sold global shares during the year?

The Quick Sale rules apply. The taxable income from Quick Sales is the lower of your Peak Holding Adjustment and the gain from the quick sales.

What is the Comparative Value (CV) method?

In general terms, under the Comparative Value method all returns (both dividends and capital gains) are taxable, including those arising from currency movements.

For individuals and family trusts that use the FDR method, relief is provided for returns below the 5% cap in any tax year as these investors have the ability to switch freely between the FDR method and the Comparative Value method between income years.

Where such an investor receives a total return between 0% and 5% in any year they will pay tax at their applicable tax rate on that actual return. For example, if a portfolio returns 3% over a year, the taxable income will be 3%.

If a loss is incurred, no tax is payable in that year but no tax loss will be recognised to offset against other income or carry forward.

Craigs Investment Partners clients

We provide all clients in our custody service with comprehensive tax reports, showing income received under the FDR method (the FDR summary) as well as for those taxed on dividends only (the Schedule of Taxable Income).

What is a PIE?

Portfolio Investment Entities (PIE) are a type of investment entity, including managed funds and most KiwiSaver schemes, which meet the IRD’s qualifying criteria. Entities elect to become a PIE.

PIEs provide some tax relief to investors, as investors are taxed at their Prescribed Investor Rate (PIR), which is usually lower than the funds marginal tax rate.

The PIE rules - Overview

The Portfolio Investment Entities (PIE) regime took effect from 1 October 2007. This regime improves the tax effectiveness for investors of managed funds (that choose to become PIEs), by lowering a fund investors tax rate, by exempting realised gains from tax, and by excluding PIE income from personal income.

Tax on income from a PIE is calculated at rates derived from the investors personal tax rates and capped at the rate of 28%. This structure provides tax savings for investors on higher personal tax rate investors greater than 28% (i.e. 33%).

PIE income is also ‘excluded’ income. That is, natural person investors and investors who are trustees of a family trust do not need to include dividends from a PIE in their tax returns, although they can do so if they choose. Because of this, no further tax is payable on distributions from a PIE.

Types of PIEs

There are two ‘types’ of PIEs: listed PIEs and unlisted PIEs. Unlisted PIEs are referred to as ‘portfolio tax rate entities’. It is only these unlisted PIEs that collect and hold a tax rate for their investors.

  • Listed PIEs- Listed PIEs, such as the Listed Property Vehicles, tax all investors at the same rate of 28%. Any imputation credits available are attached to dividends and investors with a lower personal tax rate can declare the dividend income and claim any excess imputation credits to reduce their income tax liability, if they have other taxable income in that income year. The only impact of the cuts to personal tax rates for investors in listed PIEs is that given the thresholds and rates for personal taxes are both being reduced; the relative benefit of PIE income being taxed at 28% (for those on higher tax rates) is reduced to a maximum of 5%.
  • Unlisted PIEs - Investors in unlisted PIEs can have a prescribed investor rate (PIR) applied against income generated within a PIE. Investors who have non-PIE taxable income of less than $14,000 and combined non-PIE and PIE income of less than $48,000 can use a 10.5% PIR, investors who have non-PIE taxable income of less than $48,000 and combined non-PIE and PIE income of less than $70,000 can use a 17.5% PIR. Investors with income higher than $70,000 apply a PIR of 28%.

Trusts have a ‘pass through’ option whereby they can apply a PIR that reflect the effective tax rate of beneficiaries 10.5%, 17.5% or 28%), or alternatively they can apply for a 0% rate and have no tax deducted at source. Companies, Charities and Incorporated Societies can apply for 0% PIR.

Investors with a 0% PIR will have to include all unlisted PIE income in their own tax returns.

Implications of PIEs

The PIE income thresholds and PIR rates represents a material benefit for people to source income from a PIE rather than directly. For example, applying personal tax rates, an investor who earned $70,000 from their portfolio of direct investments will have to pay $13,949 in tax, an effective tax rate of 19.9%. If they had instead sourced this $70,000 of income from a PIE their applicable tax rate would have been 17.5% and tax paid would have been $12,250. Investing in a PIE therefore would have produced a tax reduction of $1,699.

Tax Residency Self Certification

Craigs Investment Partners are now required to identify and report to the New Zealand Inland Revenue Department (NZ IRD) information on clients that are tax resident in foreign jurisdictions.

If your country of tax residency is a country other than New Zealand, we may be legally obliged to pass on the information in this form and other financial information on your account(s) to the NZ Inland Revenue Department.  The NZ Inland Revenue Department may exchange this information with tax authorities of another jurisdiction(s) that have signed intergovernmental agreements to exchange financial account information.

What the Common Reporting Standard is?

The Common Reporting Standard (CRS) is a global framework for the collection, reporting, and exchange of financial account information about people and entities investing outside of their tax residence jurisdiction.

The CRS and a comprehensive commentary along with other information about AEOI are available on the OECD's automatic exchange portal. The CRS and the related commentary have been introduced into New Zealand law.

For more information visit the following websites or talk to a tax professional:

Further information around Common Reporting Standard: