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CD 39: Calculation of amount of dividend when property made available
or “How to calculate dividends when a company lets you use its property”
You could also call this:

“How tax records are adjusted when a company recovers a dividend”

If a company gets back a dividend from a shareholder, this law makes sure the dividend and any attached tax credits are not counted for tax purposes. This happens when the company uses section 56 of the Companies Act 1993 or a similar foreign law to recover the dividend.

When this happens, the tax office (called the Commissioner) has to change the tax records for the company or shareholder. This is required by Section 113B of the Tax Administration Act 1994.

If the Commissioner knows about the recovery and has changed the tax records, they must give back any relevant income tax to the shareholder. They must also give back any non-resident withholding tax (NRWT) or resident withholding tax (RWT) to the company.

The Commissioner can give these refunds even if other rules about tax refunds would normally stop them. But they still have to follow other parts of the tax law.

When the Commissioner knows about the recovery and has changed the tax records, they must also update the imputation credit account. This is either for the company or for the shareholder if they are an imputation credit account (ICA) company. The update is made on the date the dividend was recovered.

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Next up: CD 41: Adjustment if amount repaid later

or “How to handle tax when you repay money that was once treated as a dividend”
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Part C Income
Income from equity

CD 40Adjustment if dividend recovered by company

  1. If a company recovers a dividend from a shareholder under section 56 of the Companies Act 1993 or an equivalent provision of foreign law, this section applies to the extent necessary to ensure that—

  2. the recovered dividend and any attached imputation credit are disregarded for the purposes of this Act; and
    1. the resulting refunds are made.

      1. Section 113B of the Tax Administration Act 1994 requires the Commissioner, if given notice of the recovery of the dividend from a shareholder, to amend an assessment of the company or the shareholder in relation to income tax, or under the imputation rules, the NRWT rules, the RWT rules, or under subpart LP (Tax credits for supplementary dividends), as applicable.

      2. If the Commissioner has been notified of the recovery and has amended an assessment as described in subsection (2), the Commissioner must refund any relevant—

      3. income tax of the shareholder; and
        1. non-resident withholding tax (NRWT) or resident withholding tax (RWT) of the company.

          1. The refund is made despite sections RM 2 to RM 5 (which relate to refunds of excess tax) and RM 18 to RM 21 (which relate to limits on refunds), but subject to the other provisions of this Act.

          2. If the Commissioner has been notified of the recovery and has amended an assessment as described in subsection (2), a credit or debit (as applicable) arises as at the date of recovery, and must be recorded in—

          3. the imputation credit account of the company; or
            1. if the shareholder is an imputation credit account (ICA) company, the imputation credit account of the shareholder.

              Compare
              Notes
              • Section CD 40(1)(a): amended, on , by section 21(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
              • Section CD 40(2): replaced (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on , by section 13(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
              • Section CD 40(2): amended, on , by section 21(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
              • Section CD 40(3): amended (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on , by section 13(2) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
              • Section CD 40(3)(a): replaced, on , by section 21(3) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
              • Section CD 40(4): amended (with effect on 1 April 2013), on , by section 9 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
              • Section CD 40(5): amended (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on , by section 13(3) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
              • Section CD 40(5)(b): replaced, on , by section 21(4) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
              • Section CD 40 list of defined terms FDP: repealed, on , by section 21(5) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
              • Section CD 40 list of defined terms FDP account: repealed, on , by section 21(5) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
              • Section CD 40 list of defined terms FDP credit: repealed, on , by section 21(5) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
              • Section CD 40 list of defined terms FDP penalty tax: repealed, on , by section 21(5) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
              • Section CD 40 list of defined terms FDP rules: repealed, on , by section 21(5) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
              • Section CD 40 list of defined terms FDPA company: repealed, on , by section 21(5) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
              • Section CD 40 list of defined terms imputation rules: inserted (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on , by section 13(4) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
              • Section CD 40 list of defined terms notify: inserted, on , by section 74 of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
              • Section CD 40 list of defined terms NRWT rules: inserted (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on , by section 13(4) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
              • Section CD 40 list of defined terms RWT rules: inserted (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on , by section 13(4) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).