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Income Tax Act 2007

Memorandum accounts - Imputation credit accounts (ICA)

OB 61: ICA benchmark dividend rules

You could also call this:

“Rules for companies paying multiple dividends in a tax year”

When a company that keeps an imputation credit account (ICA) pays dividends more than once in a tax year, some special rules apply. These rules don’t apply to certain types of dividends, like those from statutory producer boards, co-operative companies, or look-through companies.

The first dividend the company pays in the tax year is called the benchmark dividend. After that, all other dividends in the same tax year must have the same imputation ratio as the benchmark dividend. If the company doesn’t follow this rule, it will get an imputation debit.

You can tell the Commissioner that a dividend isn’t part of a plan to get a tax advantage. You need to do this before you pay the dividend, or later if the Commissioner allows it. If you do this, you won’t get an imputation debit for breaking the rule about matching imputation ratios.

If the company is part of a consolidated imputation group, breaking the imputation ratio rule can lead to a different kind of imputation debit. Also, in these groups, dividends paid between companies in the group don’t count for these rules.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1518861.

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Money and consumer rights > Taxes
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Part O Memorandum accounts
Imputation credit accounts (ICA)

OB 61ICA benchmark dividend rules

  1. This section applies when an ICA company pays a dividend on more than 1 occasion during a tax year. Subsection (2) overrides this subsection.

  2. This section does not apply to the following dividends:

  3. a dividend that is the subject of an election by a statutory producer board under sections OB 73 to OB 75:
    1. a dividend that is the subject of an election by a co-operative company under sections OB 78 to OB 80:
      1. an amount treated as a dividend under section CB 32C (Dividend income for first year of look-through company):
        1. a dividend paid when the company is not an ICA company.

          1. The first dividend of the tax year is the benchmark dividend.

          2. The imputation ratio of a dividend paid after the benchmark dividend must be the same as the imputation ratio of the benchmark dividend. This subsection is modified by section OZ 9 (Benchmark dividends: ratio change).

          3. A breach of subsection (4) gives rise to an amount of an imputation debit under section OB 43 (table O2: imputation debits, row 16 (breach of imputation ratio)) calculated using the formula in section OB 43(1).

          4. An ICA company may notify the Commissioner that the dividend is not part of an arrangement to obtain a tax advantage by providing a ratio change declaration stating that the dividend is not part of an arrangement to which sections GB 35 and GB 36 (which relate to imputation arrangements to obtain tax advantage) apply. The company must provide the declaration before the dividend is paid, or by a later date if the Commissioner allows. For the purposes of this subsection, the dividend must not be part of an arrangement to obtain a tax advantage. This subsection overrides subsection (5).

          5. Repealed

          6. Under section OP 2(2) (When credits and debits arise only in group accounts), a breach of an imputation ratio alternatively gives rise to an imputation debit under section OP 43 (Consolidated ICA breach of imputation ratio) (table O20: imputation debits of consolidated imputation groups, row 17 (breach of imputation ratio)) if the company is part of a consolidated imputation group.

          7. In the application of this section to a consolidated imputation group, a dividend paid between group companies is disregarded.

          Compare
          Notes
          • Section OB 61(2)(bb): inserted, on , by section 205 of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
          • Section OB 61(4): amended, on , by section 12 of the Taxation (Budget Measures) Act 2010 (2010 No 27).
          • Section OB 61(7) heading: repealed (with effect on 1 April 2008), on , pursuant to section 397(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
          • Section OB 61(7): repealed (with effect on 1 April 2008), on , by section 397(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).