What is a PTP, and how do I know if I invest in one?
A US Publicly Traded Partnership (PTP) is a business that works like a partnership, and is bought and sold on the share market like regular shares of a company. On Hatch, a banner will come up at the top of an investment that is a PTP:
⚠️ 10% withholding tax applies on sale of most Partnership investments
US Partnership investments 10% withholding tax
The US Internal Revenue Service includes a 10% withholding tax on the sale proceeds of US Publicly Traded Partnership (PTP) investments. This tax applies to the total amount received from sales of any such investment, even if you didn't make a profit. This applies to any PTP you can invest in through Hatch, unless that investment has an exemption.
What does it mean for me?
If you hold a PTP you may pay 10% withholding tax when you sell. You can see the details on Form 1042‑S which can be found under Reports > US tax statements when you log in to your Hatch account. Our broker, DriveWealth, will withhold the 10% at the time of sale and pay the IRS on your behalf.
How can I find out if a PTP Investment is exempt from this tax?
Some U.S. PTP investments don’t get the 10% tax because they qualify for an exemption. To know if a PTP is exempt, search: 'Company name + qualified notice PTP'. If a company has been issued a Qualified Notice, it means the investment meets the IRS rules for exemption.
🚨 Important: Exemptions can change over time so it is important you keep up to date if you hold any PTP investments.
How might it impact my tax reporting?
If you hold or sell an impacted investment you may be subject to additional tax reporting requirements with the IRS.
On Hatch in your NZ tax reports any PTP investment sales made after 31 December 2022 will show the additional US tax as part of the brokerage fee (see the Buy & Sell transactions report under each tax year). The IRD has not provided any official guidance as to whether this tax can be claimed as a credit in your NZ tax return.
We recommend you get advice on your tax reporting obligations if you hold or sell an impacted investment.