Add a PIE income workpaper to an entity

Overview

Use the Portfolio Investment Entity (PIE) income workpaper to record PIE income for an entity that files an IR3 tax return. The workpaper calculates PIE tax payable or receivable using the entity's Prescribed Investor Rate (PIR). Because tax on PIE income is calculated using the PIR, the income is not included in the entity's taxable income.

Add a PIE income workpaper

1. From the entity's tax year summary, in the navigation bar select Workpapers > Workpapers.
2. From the Workpapers screen, select New Workpaper, then select PIE income. Alternatively, if the entity has a PIE income account in their trial balance, the workpaper can be added directly to that. 
3. Enter the Portfolio Investment Entity income or (loss).
4. Enter the PIE tax (deducted) or credited. 
5. Select what the Prescribed Investor Rate (PIR) was at year-end.
6. Select the Correct PIR rate. This can be the same as the year-end rate, or different.
7. Select whether the PIR changed during the year. 
8. Optional: add a query, note or file, and sign off the workpaper.

Entering PIE income

If a PIE earns income, tax is withheld by the investment fund. The gross income is entered as a positive in the Portfolio Investment Entity income (loss) box, and the tax withheld entered as a negative in the PIE tax (deducted) credited box. 

If a PIE makes a loss, it usually would cash out the loss and receive a refund at the PIR rate from Inland Revenue. The gross loss is entered as a negative in the Portfolio Investment Entity income (loss) box and the tax refund entered as a positive in the PIE tax (deducted) credited box. 

• The Prescribed Investor Rate at year end is the PIR that was on record for the particular PIE investment at year end. 
• The Correct PIR Rate is the entity's correct PIR. Changing this in one PIE workpaper will change it across all PIE workpapers because an entity can only have one correct PIR for the tax year.
• Did the PIR change during the year is whether the PIR for that PIE investment changed during the year from one rate to the Prescribed Investor Rate at year end.

If an entity holds more than one PIE investment, a new workpaper should be added for each investment. This is because information such as the PIR at year end and whether the PIR changed during the year may differ across different PIE investments. 

How the PIE tax calculation works

The PIE workpaper automatically calculates any PIE tax payable or refundable, and the amount of the payment or refund required.

• Tax on PIE income is calculated based on the entity's correct PIR, not marginal tax rates. 
• The calculation aggregates PIE income (or losses) and applies the correct PIR to the income. This figure is then compared to the actual PIE tax withheld.
• If the difference is an amount payable, this is a PIE tax debit. This is added to the entity's Tax on Taxable Income in the tax return. 
• If the difference is a refund, this is a PIE tax credit. This is reflected in the entity's Residual Income Tax (RIT) in the tax return. 
• Factors such as whether a PIE investment had a different PIR at year end to the Correct PIR, and whether a PIE investment had a PIR rate change during the year impact the outcome of the calculation. 
• If the entity had a PIE tax debit but had the correct PIR on all investments at year end and no investments had a PIR rate change during the year, then nothing would be payable. 
• If a refund arises, it is always refunded.

Updating the correct PIR 

From the 2023 tax year onward, the correct PIR can be submitted to IR as part of a entity's IR3 return. 

1. From the entity's tax year summary, in the navigation bar select Reports > Tax Return Forms.
2. Select the Income Tax Return (IR3) tab, then within that, select the Provisional Tax tab.

The Correct Prescribed Investor Rate is populated from the PIE income workpaper.

Troubleshooting

Entity owes PIE tax but it is not displaying in the tax return

• PIE tax is not payable if the entity had the correct PIR on all investments at year end and there were no PIR rate changes during the year. PIE tax refunds will always be refunded, and are shown in the entity's RIT, the breakdown of which can be seen under the Tax Position.

Related articles

View the income tax position

Overview of accounts and the trial balance

Add or remove a workpaper

Add a query or note

Add a file to an entity

Sign off accounts and workpapers