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New Zealand law explained for everyone

Income Tax Act 2007

Memorandum accounts - Imputation credit accounts (ICA)

OB 62: Retrospective attachment of imputation credits

You could also call this:

“Adding tax credits to dividends after they've been paid”

When a company pays out money to its owners, it’s called a dividend. Sometimes, a company can add a special credit to this dividend after it has been paid. This is called attaching an imputation credit retrospectively.

You can do this in three situations:

If the dividend wasn’t cash (like giving out company shares) and its value changes later because of special pricing rules.
If a company is leaving New Zealand and has to pay its owners before it goes.
For certain other types of dividends.

There are rules about how much credit a company can add:

For the first and third situations, the credit can’t be more than what’s in the company’s special credit account at the end of the tax year when the dividend was paid. It also can’t be more than what’s in this account at the end of each year up to when the credit is added.
For the second situation (when a company is leaving New Zealand), the credit can’t be more than what’s in the special account just before the company leaves.

If a company adds this credit later for a non-cash dividend, and this causes the company to pay more tax, they won’t get in trouble for not reporting it correctly before. But they still need to tell the owners about the dividend and the credit.

If a company that’s leaving New Zealand pays tax on money it made before leaving, it can treat this tax as paid just before it left. This is only if the company decides to add a credit to a dividend, the credit is at least as much as the tax, and they tell the tax office about it.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1518863.

Topics:

Money and consumer rights > Taxes

OB 61: ICA benchmark dividend rules, or

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

OB 63: Australian dividends, or

“Rules for imputation credits on certain Australian dividends”

Part O Memorandum accounts
Imputation credit accounts (ICA)

OB 62Retrospective attachment of imputation credits

This section applies in relation to a dividend—
arising from a transfer pricing arrangement when an ICA company pays a non-cash dividend whose amount is later adjusted under section GC 7 or GC 8 (which relate to transfer pricing arrangements); or
arising under subpart FL (Emigration of resident companies) when an emigrating company that was an ICA company immediately before the time of emigration is treated under section FL 2 or FL 3 (which relate to the treatment of emigrating companies and their shareholders) as paying a distribution to shareholders; or
that an ICA company pays and that is described in section CD 1(3) (Dividend).

The company may attach retrospectively an imputation credit to the dividend or distribution, as applicable.
The amount of all imputation credits attached retrospectively by a company referred to in subsection (1)(a) or (c) during a tax year must not be more than the lesser of—
the credit balance of the company’s imputation credit account at the end of the tax year in which the dividend is paid; or
the credit balance of the company’s imputation credit account at the end of each of the tax years in the period that runs from the tax year of payment of the dividend to the tax year in which the credit is attached retrospectively under subsection (1).

The amount of all imputation credits attached retrospectively by a company referred to in subsection (1)(b) must be no more than the credit balance of the company’s imputation credit account immediately before the time of emigration.
Subsection (6) applies if—
a company provides a company dividend statement and issues a shareholder dividend statement for a non-cash dividend at the time it retrospectively attaches an imputation credit; and
the adjustment under section GC 7 or GC 8 results in a payment of income tax; and
the attachment of the imputation credit would otherwise result in a liability for imputation penalty tax.

The credit date for the imputation credit arising for the payment of the income tax referred to in subsection (5)(b) is the day on which the non-cash dividend is paid, and the company is excused a breach of section 69 of the Tax Administration Act 1994 for not filing a correct annual ICA return through the retrospective attachment of an imputation credit.
A company that does not meet the requirement of subsection (5)(a) remains liable to—
provide a company dividend statement; and
issue a shareholder dividend statement for the non-cash dividend and the retrospective attachment of an imputation credit.

Subsection (9) applies when an amount of tax paid by an emigrating company is attributable to income derived before the time of emigration or to the application of subpart FL.
The amount of tax referred to in subsection (8) is treated for the purposes of this subpart as paid immediately before the time of emigration if—
the company determines to attach an imputation credit to a dividend; and
the imputation credit is not less than the amount of tax; and
the company notifies the Commissioner when providing the company dividend statement.

Compare

2004 No 35 s ME 6

Notes

Section OB 62(1): replaced (with effect on 30 August 2022), on 31 March 2023, by section 93(1) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
Section OB 62(3): amended (with effect on 30 August 2022), on 31 March 2023, by section 93(2) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).