What is Tax Structure?

"Tax structure" in NZ wholesale investing typically refers to the classification of the fund as either a Portfolio Investment Entity (PIE), a Limited Partnership (LP), a trust (unit trust or discretionary trust), or a company. Each structure has materially different tax outcomes for investors.

Portfolio Investment Entity (PIE): - Tax paid at the FUND level at each investor's Prescribed Investor Rate (PIR), capped at 28%. - Distributions are tax-paid for the investor — no further income tax obligation. - Best for investors with marginal tax rates above 28% (currently income above NZ$78,100 of taxable income for the 2025 income year). - Common for NZ wholesale credit and property funds.

Limited Partnership (LP): - Tax flows through to the investor at the investor's marginal tax rate (up to 39% above NZ$180,000 of taxable income). - Investor receives an IR7 partnership statement annually and reports the income on their personal IR3 return. - Best for investors who can use foreign tax credits or who have offsetting losses. - Standard structure for NZ private equity, venture capital, and direct property syndicates.

Unit Trust (non-PIE): - Trust income taxed at the trust level (33%). - Distributions carry imputation credits to investors. - Less common as the headline structure post-PIE introduction in 2007.

Discretionary Trust: - Trust income taxed at the higher trustee rate (39% from 2024 reforms aligning with the top marginal rate). - Distributions to beneficiaries can be allocated by the trustee, potentially shifting tax burden to lower-rate beneficiaries. - Common for family-office structures investing in wholesale funds.

Company structure: - Company income taxed at the corporate rate (28%). - Dividends to shareholders carry imputation credits. - Less common for fund vehicles; more common for direct-investment SPVs.

Tax structure as a choice for the manager: the manager elects the structure when designing the fund. Once elected, it cannot easily be changed — investors who joined under one structure may not consent to a change that affects their personal tax outcome.

Why structure matters for wholesale investors: - PIR (capped at 28%) vs marginal rate (up to 39%) for high-income investors = up to 11 percentage points of permanent tax saving on PIE distributions. - LP flow-through allows institutional LPs to claim foreign tax credits that aren't preserved through PIE structures. - Trust structures offer family-office flexibility but at the top trustee rate.

Wholesale Investor NZ surface: /pie-structure provides the deeper PIE guide; the /compare/pie-vs-lp-structure comparison page covers the choice for individual investors.