From the 2021 year onwards, any PIE income and the tax deducted at your Prescribed Investor Rate (PIR) will need to be disclosed in your end of year tax return so IRD can determine whether an adjustment needs to be made for any incorrect PIE tax deductions. Tax at the PIR is no longer treated as a final tax, for example where the PIR advised is higher than it ought to have been for the period. Previously where your Notified Investor Rate (NIR: the rate you notified to your PIE provider) was higher than it should have been, that NIR became your PIR, and any excess tax deducted could not be refunded.
Recent law changes mean that the IRD will assess all PIE income at a taxpayer’s correct PIR and any overpayment or underpayment will be combined/netted off against your residual income tax. The combined balance will then be refunded or due for payment.
Note that where the notified PIR was lower than it ought to have been for the period, the PIE income is still disclosed in the taxpayer’s return and the PIE tax adjustment is calculated based on the correct PIR, resulting in some additional tax to pay.
The new rules are much more advantageous for the taxpayer where the PIR used by the PIE provider was higher than it should have been. I.e., the excess tax deducted, based on an inappropriately high PIR, can now be refunded.
Please contact us if you have any questions regarding your PIE income and prescribed investor rate.