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LB 2: Tax credits for provisional tax payments
or “You can get a credit for provisional tax payments made by you or on your behalf”
You could also call this:

“Getting a tax credit for tax withheld on your income”

You can get a tax credit for a tax year equal to the amount of tax withheld and paid on your resident passive income for that year. This includes RWT payments for non-cash dividends. To claim this credit, you need to meet the evidence requirements set out in section 78D of the Tax Administration Act 1994.

You can’t get a tax credit for tax on resident passive income that is a replacement payment.

If you’re a multi-rate PIE or an investor in one, there are limits on how much of a tax credit you can get. These limits are set out in subpart HM.

If you’re a trustee of a trust, you can separate some or all of the tax credit for resident passive income that the trust earned in a year. You can do this if you distribute that income to a beneficiary in the same year or within the extended period allowed. You also need to make an RWT substitution payment.

As a trustee, you can choose to give some or all of this separated tax credit to a beneficiary. You keep any part of the credit you don’t give to a beneficiary. The beneficiary gets a tax credit for the amount you give them.

If you’re a beneficiary, any tax credit you would normally get is reduced by the amount of the RWT substitution payment you receive.

These rules about trustees giving tax credits to beneficiaries don’t apply in some situations involving principals, as set out in section HD 4(b).

A ‘detached tax credit’ is an amount equal to an RWT substitution payment that meets certain conditions.

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Next up: LB 4: Tax credits for families

or “Financial support for families through tax credits”
Next

Part L Tax credits and other credits
Tax credits for payments, deductions, and family payments

LB 3Tax credits for resident withholding tax

  1. A person has a tax credit for a tax year equal to the amount of tax withheld and paid in relation to their resident passive income for the tax year if the evidential requirements of section 78D of the Tax Administration Act 1994 are met. The amount of tax includes a payment of RWT for a non-cash dividend.

  2. No credit exists under subsection (1) for an amount of tax for resident passive income that is a replacement payment.

  3. For a multi-rate PIE and an investor in a multi-rate PIE, the amount of a tax credit is limited to the extent allowed under subpart HM (Portfolio investment entities).

  4. A trustee of a trust may detach some or all of a tax credit referred to in subsection (1) for resident passive income—

  5. that is derived by the trustee in an income year; and
    1. that is distributed to a person (person A) who is a beneficiary of the trust in—
      1. the income year referred to in paragraph (a); or
        1. the extended period referred to in section HC 6(1)(b) (Beneficiary income); and
        2. in relation to which the trustee makes an RWT substitution payment under section RE 2(7).

          1. The trustee may, in a return of income for the income year referred to in subsection (4)(a), choose to allocate, for that year, an amount to a beneficiary of the trust that is equal to some or all of the amount of the detached tax credit referred to in subsection (4). The trustee has a tax credit equal to the amount that is not allocated to a beneficiary, and a beneficiary has a tax credit for the amount that is allocated to them.

          2. Despite subsection (1), an amount of a tax credit that person A would have under this section in the absence of subsections (4) and (5) must be reduced by an amount equal to the RWT substitution payment received by person A.

          3. Subsection (5) does not apply in the circumstances set out in section HD 4(b) (Treatment of principals).

          4. A detached tax credit, for a beneficiary and an income year, means an amount equal to the amount of an RWT substitution payment referred to in subsection (4)(c) that meets the requirements of subsection (4)(a) and (b).

          Compare
          Notes
          • Section LB 3(1): amended, on , by section 155(1) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
          • Section LB 3(3) heading: substituted, on (applying for the 2010–11 and later income years), by section 313(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
          • Section LB 3(3): substituted, on (applying for the 2010–11 and later income years), by section 313(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
          • Section LB 3(4) heading: replaced, on (with effect on 1 April 2008), by section 155(2) (and see section 155(4) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
          • Section LB 3(4): replaced, on (with effect on 1 April 2008), by section 155(2) (and see section 155(4) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
          • Section LB 3(5) heading: replaced, on (with effect on 1 April 2008), by section 155(2) (and see section 155(4) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
          • Section LB 3(5): replaced, on (with effect on 1 April 2008), by section 155(2) (and see section 155(4) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
          • Section LB 3(6) heading: inserted, on (with effect on 1 April 2008), by section 155(2) (and see section 155(4) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
          • Section LB 3(6): inserted, on (with effect on 1 April 2008), by section 155(2) (and see section 155(4) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
          • Section LB 3(7) heading: inserted, on (with effect on 1 April 2008), by section 155(2) (and see section 155(4) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
          • Section LB 3(7): inserted, on (with effect on 1 April 2008), by section 155(2) (and see section 155(4) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
          • Section LB 3(8) heading: inserted, on (with effect on 1 April 2008), by section 155(2) (and see section 155(4) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
          • Section LB 3(8): inserted, on (with effect on 1 April 2008), by section 155(2) (and see section 155(4) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
          • Section LB 3 list of defined terms amount: inserted, on (with effect on 1 April 2008), by section 155(3) (and see section 155(4) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
          • Section LB 3 list of defined terms Commissioner: inserted, on (with effect on 1 April 2008), by section 155(3) (and see section 155(4) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
          • Section LB 3 list of defined terms detached tax credit: inserted, on (with effect on 1 April 2008), by section 155(3) (and see section 155(4) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
          • Section LB 3 list of defined terms income tax liability: inserted, on (with effect on 1 April 2008), by section 155(3) (and see section 155(4) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
          • Section LB 3 list of defined terms income year: inserted, on (with effect on 1 April 2008), by section 155(3) (and see section 155(4) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
          • Section LB 3 list of defined terms multi-rate PIE: inserted, on , by section 313(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
          • Section LB 3 list of defined terms notify: inserted, on (with effect on 1 April 2008), by section 155(3) (and see section 155(4) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
          • Section LB 3 list of defined terms portfolio tax rate entity: repealed, on , by section 313(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
          • Section LB 3 list of defined terms resident withholding tax: repealed, on , by section 243 of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
          • Section LB 3 list of defined terms RWT substitution payment: inserted (with effect on 1 April 2008), on , by section 99(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
          • Section LB 3 list of defined terms trustee: added (with effect on 1 April 2008), on , by section 99(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
          • Section LB 3 list of defined terms trustee income: inserted, on (with effect on 1 April 2008), by section 155(3) (and see section 155(4) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).