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Income Tax Act 2007

Memorandum accounts - Imputation credit accounts (ICA)

OB 43: ICA breach of imputation ratio

You could also call this:

“Penalty for giving too many imputation credits with dividends”

You have an imputation credit account (ICA) company. If your company breaks the rules about how much imputation credit it can give with dividends, it gets a debit in its account. This is called a ‘breach of imputation ratio’.

To work out the debit amount, you use a special calculation. You multiply the total dividends (not counting the imputation credits) by the highest allowed imputation ratio. Then you take away the total imputation credits actually given out with dividends.

The highest allowed ratio is either the maximum set by the rules in section OA 18(2), or the highest ratio you actually used for dividends that year, if it’s lower.

This debit goes into your imputation account on the last day of the tax year. But you won’t get this debit if you give a special declaration about changing your ratio, as mentioned in section OB 61(6).

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1518799.

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Part O Memorandum accounts
Imputation credit accounts (ICA)

OB 43ICA breach of imputation ratio

  1. An ICA company has an imputation debit for a breach of the benchmark dividend rules in section OB 61(5) for an amount calculated using the formula—

    (net dividends × imputation ratio) − attached credits.

    Where:

    • In the formula,—

    • net dividends is the total amount of all dividends paid by the company during the tax year, excluding the amount of imputation credits attached to the dividends:
      1. imputation ratio is the maximum permitted ratio calculated under section OA 18(2) (Calculation of maximum permitted ratios) for an imputation credit or, if less, the greatest imputation ratio of dividends paid by the company for the tax year:
        1. attached credits is the total amount of all imputation credits attached to dividends paid by the company for the tax year.

          1. The imputation debit in subsection (1) is referred to in table O2: imputation debits, row 16 (breach of imputation ratio).

          2. A debit under subsection (1) does not arise if the company provides a ratio change declaration under section OB 61(6).

          3. The debit date is the last day of the tax year.

          Compare
          Notes
          • Section OB 43(2)(a): amended, on , by section 200(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
          • Section OB 43 list of defined terms FDP credit: repealed, on , by section 200(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).