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Income Tax Act 2007

Tax credits and other credits - Tax credits for supplementary dividends

LP 2: Tax credits for supplementary dividends

You could also call this:

“Tax credits for companies paying dividends to certain non-residents and foreign investment PIEs”

When a company in New Zealand pays a dividend and a related supplementary dividend to certain non-residents or foreign investment PIEs, they can get a tax credit. This applies if the non-resident owns less than 10% of the company’s voting rights and the tax rate after treaties is 15% or more. For foreign investment PIEs, it applies if a qualifying investor meets these conditions.

The tax credit is calculated using a formula: credit amount × 54 ÷ 119. The credit amount is the imputation credit that would normally be attached to the dividend.

For qualifying investors in foreign investment PIEs, there are special rules. The credit amount is based on the portion of the dividend attributed to the investor. The dividend is treated as if it were paid directly to the investor, and the investor’s voting interest is treated as a direct voting interest.

Section OZ 12 might change how the tax credit is calculated.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1518282.

Topics:
Money and consumer rights > Taxes
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LP 1: What this subpart does, or

“This subpart outlines tax credits for supplementary dividends paid to non-New Zealand residents”

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LP 3: Use of remaining credits, or

“How a company can use or share its leftover tax credits”

Part L Tax credits and other credits
Tax credits for supplementary dividends

LP 2Tax credits for supplementary dividends

  1. This section applies when a company resident in New Zealand pays a dividend and a related supplementary dividend to—

  2. a non-resident, if—
    1. the non-resident has less than a 10% direct voting interest in the company; and
      1. the post-treaty tax rate for the dividend and the related supplementary dividend is 15% or more; or
        1. a foreign investment PIE if—
          1. a notified foreign investor (a qualifying investor) in the PIE meets the requirements of paragraph (a); and
            1. an amount representing the dividend and the related supplementary dividend is attributed to the qualifying investor, or would be attributed to them in the absence of section HM 44B(2) (NRWT calculation option); and
              1. the PIE notifies the company under section HM 55FB (Notified foreign investors and tax credits for supplementary dividends), providing the relevant information on those qualifying investors who have an entitlement to the dividend and related supplementary dividend.

              2. For the tax year corresponding to the income year in which the company pays the dividend, the company has a tax credit equal to an amount calculated using the formula—

                credit amount × 54 ÷ 119.

                Where:

                • In the formula, credit amount is the imputation credit that would, in the absence of this subpart, be attached to the dividend.

                • For the purposes of subsection (1)(c) and the calculation of the amount of the credit, the following apply in relation to a qualifying investor in a foreign investment PIE:

                • the item credit amount in the formula is the imputation credit that would, in the absence of this subpart, be attached to the portion of the dividend attributed to the investor:
                  1. the relevant amount of the dividend and related supplementary dividend is treated as if it were paid by the company directly to the investor:
                    1. the investor's voting interest in the company is treated as if it were a direct voting interest.

                      1. Repealed

                      2. Repealed

                      3. Repealed

                      4. Section OZ 12 (Tax credits for non-resident investors) may apply to modify subsection (2).

                      Compare
                      Notes
                      • Section LP 2(1)(a): substituted, on , by section 78(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                      • Section LP 2(1)(b): repealed, on , by section 78(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                      • Section LP 2(1)(c): inserted, on (applying for the 2013–14 and later income years), by section 118(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                      • Section LP 2(2): amended, on , by section 78(3) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                      • Section LP 2(2) formula: amended (with effect on 1 April 2008), on , by section 162(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                      • Section LP 2(2) formula: amended, on (applying for the 2011–12 and later income years), by section 91(1) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
                      • Section LP 2(2) formula: amended, on , by section 450(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                      • Section LP 2(3): amended (with effect on 1 April 2008), on , by section 162(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                      • Section LP 2(3B) heading: inserted, on (applying for the 2013–14 and later income years), by section 118(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                      • Section LP 2(3B): inserted, on (applying for the 2013–14 and later income years), by section 118(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                      • Section LP 2(3B)(a): amended (with effect on 1 April 2008), on , by section 162(3) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                      • Section LP 2(4) heading: repealed, on (applying for the 2013–14 and later income years), pursuant to section 78(4) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                      • Section LP 2(4): repealed, on (applying for the 2013–14 and later income years), by section 78(4) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                      • Section LP 2(5) heading: repealed, on , pursuant to section 78(5) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                      • Section LP 2(5): repealed, on , by section 78(5) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                      • Section LP 2(6) heading: repealed, on , by section 78(5) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                      • Section LP 2(6): repealed, on , by section 78(5) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                      • Section LP 2(7) heading: inserted (with effect on 1 April 2008), on , by section 71 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
                      • Section LP 2(7): added, on , by section 450(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                      • Section LP 2 list of defined terms direct voting interest: inserted (with effect on 1 April 2008), on , by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                      • Section LP 2 list of defined terms notify: inserted, on , by section 74 of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
                      • Section LP 2 list of defined terms post-treaty tax rate: inserted (with effect on 1 April 2008), on , by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                      • Section LP 2 list of defined terms supplementary dividend holding company: repealed (with effect on 1 April 2008), on , by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                      • Section LP 2 list of defined terms year of payment: repealed (with effect on 1 April 2008), on , by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).