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Income Tax Act 2007

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

RE 14: Non-cash dividends other than certain share issues

You could also call this:

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

When someone gives you a non-cash dividend, there are special rules about how much tax needs to be paid. This doesn’t apply to certain types of share issues or dividends that are covered by other rules.

If you get a non-cash dividend along with a regular cash dividend, different rules might apply if certain conditions are met.

To figure out how much tax needs to be paid, there’s a special calculation. It uses the basic tax rate, the amount of the dividend before tax, and takes into account any tax credits or foreign tax that might have already been paid.

The person giving the dividend needs to pay this tax to the Commissioner, just like they would if they were withholding tax from a cash payment.

Remember, these rules are part of New Zealand’s tax laws and help make sure that non-cash dividends are taxed fairly.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1520237.

Topics:
Money and consumer rights > Taxes
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RE 13: Dividends other than non-cash dividends, or

“Tax withholding rules for cash dividends”

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RE 14B: Combined cash and non-cash dividends, or

“Rules for tax on dividends that are part cash and part non-cash”

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

RE 14Non-cash dividends other than certain share issues

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

  2. a bonus issue in lieu:
    1. a share issued under a profit distribution plan:
      1. a dividend referred to in section RE 14C.

        1. This section does not apply if,—

        2. at the same time as making a payment of a relevant non-cash dividend the person also makes a payment of a dividend other than 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 pay under subsection (4) to the Commissioner is calculated using the formula—

                (tax rate × dividend paid ÷ (1 − tax rate)) − 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 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.

                          2. For the purposes of subsection (2), the person must pay to the Commissioner the amount calculated as if it were the amount of tax required to be withheld and paid under the RWT rules.

                          Compare
                          Notes
                          • Section RE 14 heading: replaced (with effect on 1 October 2012), on , by section 147(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                          • Section RE 14(1): replaced (with effect on 1 October 2012), on , by section 147(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                          • Section RE 14(1)(c): inserted, on (with effect on 1 April 2017 and applying for the 2017–18 and later income years), by section 224(1) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
                          • Section RE 14(1B) heading: inserted, on , by section 267(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                          • Section RE 14(1B): inserted, on , by section 267(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                          • Section RE 14(2) formula: replaced (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on , by section 141(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
                          • Section RE 14(3)(a) tax rate: amended, on , by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                          • Section RE 14(3)(c)(ii): amended, on , by section 267(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                          • Section RE 14(3)(c)(iii): repealed, on , by section 267(3) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                          • Section RE 14 list of defined terms FDP credit: repealed, on , by section 267(4) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                          • Section RE 14 list of defined terms profit distribution plan: inserted (with effect on 1 October 2012), on , by section 147(3) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).