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Income Tax Act 2007

Tax credits and other credits - Tax credits for imputation credits

LE 2: Use of remaining credits by companies and trustees

You could also call this:

“How companies and trustees can use leftover tax credits”

This law explains how some people and companies can use leftover tax credits. If you’re a company (not a life insurance company), a trustee (except for the Maori trustee), or a Maori authority, and you have tax credits left over at the end of the tax year, you can use them in a special way.

You can turn these leftover credits into a ‘tax loss component’. This is like saying you earned less money than you actually did, which can help reduce your taxes in the future. To figure out how much of a tax loss you get, you divide your leftover credit by the basic tax rate.

If you’re a life insurance company, you can only use the leftover credits related to your shareholders, not the whole company.

To work out your tax loss, you use a simple math formula. You take your leftover credit and divide it by the basic tax rate. The basic tax rate is found in another part of the tax law called schedule 1, part A.

This rule helps people and companies use up all their tax credits, even if they can’t use them all in the current year.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1518028.

Topics:
Money and consumer rights > Taxes
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LE 1: Tax credits for imputation credits, or

“Credits for tax already paid on company profits included in your income”

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LE 2B: Use of remaining credits by life insurer on policyholder base, or

“How life insurers can use leftover policyholder tax credits as deductions”

Part L Tax credits and other credits
Tax credits for imputation credits

LE 2Use of remaining credits by companies and trustees

  1. This section applies when—

  2. a person described in subsection (2) has an amount of tax credit remaining for a tax year under section LA 5(4) (Treatment of remaining credits):
    1. a life insurer has an amount of tax credit remaining for a tax year under section LA 5(4), but only to the extent to which the amount is for their shareholder base.

      1. The person referred to in subsection (1)(a) must be—

      2. a company that is not a life insurer; or
        1. a trustee (other than the Maori trustee); or
          1. a Maori authority.

            1. The person or the life insurer, as applicable, has a tax loss component for the corresponding income year equal to an amount calculated using the formula—

              person's remaining credit ÷ tax rate.

              Where:

              • In the formula,—

              • person’s remaining credit is the amount of the tax credit remaining for the tax year under section LA 5(4), but, for a life insurer, only to the extent to which the amount is for their shareholder base:
                1. tax rate is the basic rate of income tax set out in schedule 1, part A (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe benefits).

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                  Notes
                  • Section LE 2(1) heading: substituted, on , by section 325(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                  • Section LE 2(1): substituted, on , by section 325(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                  • Section LE 2(2): amended, on , by section 325(2)(a) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                  • Section LE 2(2)(a): amended, on , by section 325(2)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                  • Section LE 2(3): amended, on , by section 325(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                  • Section LE 2(4)(a): amended, on , by section 325(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                  • Section LE 2(4)(b): amended, on , by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                  • Section LE 2 list of defined terms life insurer: inserted, on , by section 325(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                  • Section LE 2 list of defined terms shareholder base: inserted, on , by section 325(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).