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Income Tax Act 2007

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

RE 15: Bonus issues in lieu and shares issued under profit distribution plans

You could also call this:

“How companies calculate tax on bonus shares or profit distribution plan shares instead of cash dividends”

When you get a dividend that is a bonus issue instead of cash or a share given out under a profit distribution plan, the company has to work out how much tax to take off. They use a special calculation to do this.

The calculation looks at how much money you would have got if you took cash instead of the bonus shares. It also takes into account any tax credits that might come with the dividend.

If the company giving you the dividend is from New Zealand, they might give you an imputation credit. This is like a special tax credit. If the company is from another country, they might have already paid some foreign tax on the dividend.

The company uses all this information to work out the right amount of tax to take off your dividend before giving it to you.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1520244.

Topics:
Money and consumer rights > Taxes
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Part R General collection rules
Withholding tax on resident passive income (RWT)

RE 15Bonus issues in lieu and shares issued under profit distribution plans

  1. This section applies when a person makes a payment of resident passive income that consists of a dividend that is—

  2. a bonus issue in lieu:
    1. a share issued under a profit distribution plan.

      1. The amount of tax for the payment is calculated using the formula—

        (tax rate × (alternative amount + 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. alternative amount is, as applicable,—
            1. the net amount of money offered as an alternative to the bonus issue before the amount of tax is determined; or
              1. for a share issued under a profit distribution plan, the net amount offered by the company for the reacquisition of the share before the amount of tax is determined:
              2. 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.

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                    Notes
                    • Section RE 15 heading: replaced (with effect on 1 October 2012), on , by section 148(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                    • Section RE 15(1): replaced (with effect on 1 October 2012), on , by section 148(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                    • Section RE 15(3)(a) tax rate: amended, on , by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                    • Section RE 15(3)(b) alternative amount: replaced (with effect on 1 October 2012), on , by section 148(3) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                    • Section RE 15(3)(b)(ii): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on , by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                    • Section RE 15(3)(c)(ii): amended, on , by section 269(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                    • Section RE 15(3)(c)(iii): repealed, on , by section 269(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                    • Section RE 15 list of defined terms Commissioner: inserted (with effect on 1 October 2012), on , by section 148(4) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                    • Section RE 15 list of defined terms FDP credit: repealed, on , by section 269(3) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                    • Section RE 15 list of defined terms profit distribution plan: inserted (with effect on 1 October 2012), on , by section 148(4) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                    • Section RE 15 list of defined terms RWT rules: inserted (with effect on 1 October 2012), on , by section 148(4) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).