Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Income - Income from equity

CD 18: Dividend reduced if foreign tax paid on company’s income

You could also call this:

“Dividend may be lowered if you've paid overseas tax on the company's income”

You can reduce the amount of a dividend you receive from a foreign company if you’ve paid income tax on the company’s income in another country. This applies if you have to pay tax on the company’s income as if it were a partnership and you were a partner.

To get this reduction, you need to actually pay the foreign income tax. You also need to be ready to give the Commissioner information about how much tax you paid if they ask for it.

The amount you can reduce your dividend by is calculated using a formula. You take the total amount of foreign income tax you’ve paid on the company’s income and subtract any reductions you’ve already made to other dividends from the same company.

The reduction can’t be less than zero. This means if you’ve already reduced other dividends by more than the total tax you’ve paid, you can’t reduce this dividend further.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1512583.

Topics:
Money and consumer rights > Taxes
Previous

CD 17: Credit transfer notice, or

“How to notify the lender about dividends received on borrowed shares”

Next

CD 19: Foreign tax credits and refunds linked to dividends, or

“Tax credits and refunds from overseas dividends can increase your dividend amount”

Part C Income
Income from equity

CD 18Dividend reduced if foreign tax paid on company’s income

  1. This section applies when a person—

  2. derives a dividend from a company that is a foreign company; and
    1. has a liability under the laws of a country or territory outside New Zealand for income tax on income of the company corresponding to the liability that the person would have under the laws of New Zealand for income tax on income of the company if the company were a partnership in which the person were a partner; and
      1. pays the income tax; and
        1. provides to the Commissioner upon request, in the time allowed by the Commissioner, sufficient information to satisfy the Commissioner as to the amount of income tax paid.

          1. The amount of the dividend is reduced by the greater of zero and the amount calculated using the formula—

            total tax paid − earlier reductions.

            Where:

            • In the formula,—

            • total tax paid is the total amount of income tax on income of the company that the person has paid in the country or territory by the time that the person derives the dividend:
              1. earlier reductions is the total amount of reductions under this section that, by the time that the person derives the dividend, have affected other dividends derived by the person from the company.

                Compare
                Notes
                • Section CD 18(3)(a): amended, on , by section 73 of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                • Section CD 18 list of defined terms request: inserted, on , by section 74 of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).