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Income Tax Act 2007

General collection rules - Withholding tax on resident passive income (RWT)

RE 13: Dividends other than non-cash dividends

You could also call this:

“Tax withholding rules for cash dividends”

When you receive a payment that is a dividend, but not a non-cash dividend, this law explains how much tax needs to be withheld. This applies to resident passive income.

There’s an exception to this rule. If you receive both a cash and a non-cash dividend at the same time, and you choose to use section RE 14B, this law doesn’t apply. But you must meet all the requirements of section RE 14B for this exception to work.

To figure out how much tax to withhold, you use a special formula. The formula looks at the tax rate, the amount of dividend paid, and any tax already paid or credits attached to the dividend.

The tax rate used in the formula is found in schedule 1, part D, clause 5 of the Income Tax Act. The dividend paid is the amount you receive before any tax is taken out.

The ‘tax paid or credit attached’ part of the formula includes two things:

  1. If the dividend comes from a company with an imputation credit account, it includes any imputation credits attached to the dividend.
  2. If the dividend is from a company outside New Zealand, it includes any foreign tax that was withheld from the dividend.

After you use the formula, you get the amount of tax that needs to be withheld and paid to the Commissioner.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1520231.

Topics:
Money and consumer rights > Taxes
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RE 14: Non-cash dividends other than certain share issues, or

“Rules for taxing non-cash dividends, except for certain share issues”

Part R General collection rules
Withholding tax on resident passive income (RWT)

RE 13Dividends other than non-cash dividends

  1. This section applies when a person makes a payment of resident passive income that consists of a dividend other than a non-cash dividend.

  2. This section does not apply if,—

  3. at the same time as making a payment of a dividend other than a non-cash dividend, the person also makes a payment of a non-cash dividend; and
    1. they choose to apply section RE 14B; and
      1. the requirements of section RE 14B are met.

        1. The amount of tax for the payment that the person must withhold and pay to the Commissioner is calculated using the formula—

          (tax rate × (dividend paid + tax paid or credit attached))− tax paid or credit attached.

          Where:

          • In the formula,—

          • tax rate is the basic rate set out in schedule 1, part D, clause 5 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe benefits):
            1. dividend paid is the amount of the dividend paid before the amount of tax is determined:
              1. tax paid or credit attached is the total of the following amounts:
                1. if the dividend is paid in relation to shares issued by an imputation credit account (ICA) company, the amount of an imputation credit attached to the dividend:
                  1. if the dividend is paid in relation to shares issued by a company not resident in New Zealand, the amount of foreign withholding tax paid or payable on the amount of dividend.

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                    Notes
                    • Section RE 13(1B) heading: inserted, on , by section 266(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                    • Section RE 13(1B): inserted, on , by section 266(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                    • Section RE 13(3)(a) tax rate: amended (with effect from 1 April 2008), on , by section 45 of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
                    • Section RE 13(3)(a) tax rate: amended, on , by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                    • Section RE 13(3)(c)(ii): amended, on , by section 266(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                    • Section RE 13(3)(c)(iii): repealed, on , by section 266(3) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                    • Section RE 13 list of defined terms FDP credit: repealed, on , by section 266(4) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).