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Income Tax Act 2007

Taxation of certain entities - Qualifying companies (QC)

HA 15: Fully imputed distributions

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“Rules for fully imputed dividends paid by qualifying companies”

When a qualifying company with an imputation credit account pays a dividend, it can be fully imputed. This doesn’t apply to non-cash dividends, except for taxable bonus issues.

The amount of a fully imputed distribution is calculated by dividing the attached imputation credit by the tax rate. The tax rate is the basic rate of income tax set out in schedule 1, part A, clause 2, which may be modified by section OZ 14.

The qualifying company is treated as having attached an imputation credit to the dividend. The amount of this credit is the smaller of two options:

  1. The maximum imputation credit allowed under section OA 18, possibly modified by section OZ 14.
  2. An amount calculated using a formula that considers the company’s imputation credit account balance, the dividend amount, and previous dividends paid in the tax year.

A qualifying company can only attach imputation credits to dividends under this section. If part of the dividend is exempt income under sections HA 14 and HA 16, the imputation credit is treated as attached to the non-exempt part.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1517160.

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Money and consumer rights > Taxes
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Part H Taxation of certain entities
Qualifying companies (QC)

HA 15Fully imputed distributions

  1. This section applies when a qualifying company with an imputation credit account pays a dividend. However, this section does not apply to a non-cash dividend other than a taxable bonus issue.

  2. The amount of a fully imputed distribution is calculated using the formula—

    attached imputation credit ÷ tax rate.

    Where:

    • In the formula in subsection (2),—

    • attached imputation credit is the amount determined under subsection (4), and the amount is zero if no imputation credit is attached:
        1. tax rate is the basic rate of income tax set out in schedule 1, part A, clause 2 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe benefits) at the time the shareholder derives the dividend, modified as applicable by section OZ 14 (Dividends from qualifying companies).

          1. A qualifying company that is an imputation credit account (ICA) company is treated as having attached an imputation credit to the dividend. The amount of the imputation credit is the lesser of—

          2. the maximum imputation credit that may be attached to the dividend under section OA 18 (Calculation of maximum permitted ratios) modified as applicable by section OZ 14; and
            1. an amount calculated using the formula in subsection (6).

              1. Repealed

              2. The formula referred to in subsection (4) is—

                attached credits × amount of dividend ÷ amount paid before credits attached.

                Where:

                • In the formula in subsection (6),—

                • attached credits is the balance in the company’s imputation credit account on the last day of the tax year in which the dividend is paid before a debit is made for any imputation credits that are attached:
                  1. amount of the dividend is the amount before any imputation credits are attached:
                    1. amount paid before credits attached is the total amount of dividends, excluding non-cash dividends other than taxable bonus issues, paid by the company during the tax year before any imputation credits are attached.

                      1. An imputation credit may not be attached to a dividend by a qualifying company except under this section.

                      2. If part of the dividend is exempt income under sections HA 14 and HA 16, an imputation credit is treated as attached to the part that is not exempt income.

                      Compare
                      Notes
                      • Section HA 15(1): amended, on , by section 124(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                      • Section HA 15(1): amended (with effect on 1 April 2008), on , by section 256(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                      • Section HA 15(2) formula: replaced, on , by section 124(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                      • Section HA 15(3)(b): repealed, on , by section 124(3) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                      • Section HA 15(3)(c): amended, on , by section 409(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                      • Section HA 15(3)(c): amended, on , by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                      • Section HA 15(4)(a): amended, on , by section 409(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                      • Section HA 15(5) heading: repealed, on , pursuant to section 124(4) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                      • Section HA 15(5): repealed, on , by section 124(4) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                      • Section HA 15(6): amended, on , by section 124(5) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                      • Section HA 15(7): replaced, on , by section 124(6) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                      • Section HA 15(8) heading: replaced, on , by section 124(7) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                      • Section HA 15(8): replaced, on , by section 124(7) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                      • Section HA 15(9) heading: substituted (with effect on 1 April 2008), on , by section 256(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                      • Section HA 15(9): substituted (with effect on 1 April 2008), on , by section 256(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                      • Section HA 15(9): amended, on , by section 124(8) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                      • Section HA 15 list of defined terms FDP: repealed, on , by section 124(9) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                      • Section HA 15 list of defined terms FDP account: repealed, on , by section 124(9) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                      • Section HA 15 list of defined terms FDP credit: repealed, on , by section 124(9) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                      • Section HA 15 list of defined terms FDP rules: repealed, on , by section 124(9) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                      • Section HA 15 list of defined terms FDPA company: repealed, on , by section 124(9) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).