Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Income - Exempt income

CW 9: Dividend derived from foreign company

You could also call this:

“Tax exemption for NZ companies receiving foreign dividends, with exceptions”

If you are a company living in New Zealand, you don’t have to pay tax on money you get from a foreign company as a dividend. This is called exempt income.

However, there are some cases where you might still need to pay tax on these dividends:

If the dividend is paid for certain types of investments that are not covered by some special rules. These include investments in some Australian companies, some Australian unit trusts, and some venture capital companies.

If the dividend is paid for something called a “fixed-rate foreign equity” or for rights to a “deductible foreign equity distribution”.

This rule doesn’t apply if you are a special type of investment company called a “portfolio investment entity”. It also doesn’t apply to some income from foreign investment funds.

Remember, these are just general rules. If you want to know exactly how they apply to you, you should talk to someone who knows a lot about tax laws.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1513146.

Topics:
Money and consumer rights > Taxes
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Part C Income
Exempt income

CW 9Dividend derived from foreign company

  1. A dividend from a foreign company is exempt income if derived by a company that is resident in New Zealand.

  2. Subsection (1) does not apply to a dividend if the dividend is paid in relation to rights that are—

  3. a direct income interest that meets the requirements of neither section EX 34 (CFC rules exemption) nor section EX 35 (Exemption for interest in FIF resident in Australia) and is excluded from being an attributing interest by—
    1. section EX 31 (Exemption for ASX-listed Australian companies):
      1. section EX 32 (Exemption for Australian unit trusts with adequate turnover or distributions):
        1. section EX 36 (Venture capital company emigrating to grey list country: 10-year exemption):
          1. section EX 37 (Grey list company owning New Zealand venture capital company: 10-year exemption):
            1. section EX 37B (Share in grey list company acquired under venture investment agreement):
              2. a fixed-rate foreign equity:
                1. rights to a deductible foreign equity distribution.

                  1. This section does not apply to a dividend—

                  2. derived by a portfolio investment entity:
                    1. excluded by section CD 36(2) (Foreign investment fund income) from the effect of section CD 36(1).

                      Notes
                      • Section CW 9: substituted (with effect on 30 June 2009), on , by section 41(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                      • Section CW 9(2)(a): amended (with effect on 1 July 2011 and applying for income years beginning on or after that date), on , by section 9(1) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                      • Section CW 9(2)(a)(vi): repealed, on , by section 136 of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                      • Section CW 9(3) heading: replaced (with effect on 1 July 2011 and applying for income years beginning on or after that date), on , by section 9(2) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                      • Section CW 9(3): replaced (with effect on 1 July 2011 and applying for income years beginning on or after that date), on , by section 9(2) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                      • Section CW 9 list of defined terms multi-rate PIE: repealed (with effect on 1 July 2011), on , by section 9(3)(a) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                      • Section CW 9 list of defined terms portfolio investment entity: inserted (with effect on 1 July 2011), on , by section 9(3)(b) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).
                      • Section CW 9 list of defined terms portfolio tax rate entity: repealed (with effect on 1 July 2011), on , by section 9(3)(a) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).