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Income Tax Act 2007

Taxation of certain entities - Qualifying companies (QC)

HA 18: Treatment of dividends when qualifying company status ends

You could also call this:

“How dividends are handled when a company loses its qualifying status”

When a company stops being a qualifying company, there are special rules about how to handle dividends. These rules are part of New Zealand’s tax laws.

If the company stops being a qualifying company during a tax year, you need to look at two different time periods. From the start of the tax year until the day before the company’s status changes, the normal rules about dividends for qualifying companies still apply. You can find these rules in section HA 15.

On the last day that the company is still a qualifying company, you need to do something with its imputation credit account. This is like a special bank account for tax credits. You have to take away some credits from this account. The amount you take away is whichever is smaller:

  1. The balance left in the account after any credits have been attached to dividends under section HA 15, or
  2. The biggest amount that would have been taken away if the company had lost shareholder continuity before that day.

This second option is explained in more detail in section OB 41.

These rules help make sure that when a company changes from being a qualifying company to a regular company, its tax situation is sorted out properly.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1517176.

Topics:
Money and consumer rights > Taxes
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“Qualifying companies must pay tax on dividends from related NZ companies”

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HA 19: Credit accounts and dividend statements, or

“Rules for qualifying companies when paying dividends and reporting them”

Part H Taxation of certain entities
Qualifying companies (QC)

HA 18Treatment of dividends when qualifying company status ends

  1. This section applies when a company’s status as a qualifying company ends under section HA 11(1).

  2. Section HA 15 applies to a dividend distributed in the period of a tax year from the first day to the day before the date on which the status ends. References in that section to a tax year should be read as references to that period of the year.

  3. On the day before the date on which the status ends, the company’s imputation credit account is debited under section OB 41 (ICA debit for loss of shareholder continuity) by the lesser of—

  4. the balance of the credit account on that day after any credits are attached under section HA 15; and
    1. the largest debit to the credit account that would have arisen before that day if section OB 41 had applied.

      1. Repealed
      Compare
      Notes
      • Section HA 18(4) heading: repealed, on , pursuant to section 126(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
      • Section HA 18(4): repealed, on , by section 126(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
      • Section HA 18 list of defined terms FDP account: repealed, on , by section 126(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).