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New Zealand law explained for everyone

Income Tax Act 2007

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

RE 25: When amount of tax treated as imputation credit

You could also call this:

“Tax withheld from share-lending payments becomes an imputation credit”

When you borrow shares from someone, you might need to pay them a replacement payment. If you do, you have to withhold some tax from this payment. This withheld tax is treated in a special way.

The tax you withhold is seen as an extra imputation credit for the person who lent you the shares. This is on top of any other imputation credit you might add to the payment. An imputation credit is like a special note that says some tax has already been paid.

Even though the person who lent you the shares gets this extra imputation credit, they can’t use it to get a tax refund or credit. The law doesn’t allow them to use it that way.

This rule applies to something called a “share-lending arrangement”. It’s a way for people to temporarily swap shares.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1520289.

Topics:
Money and consumer rights > Taxes
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RE 24: When amount of tax treated as Maori authority credit, or

“When Maori authorities deduct tax from distributions, it becomes a special credit”

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“How withholding tax works when someone else pays on your behalf”

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

RE 25When amount of tax treated as imputation credit

  1. This section applies when a share user under a share-lending arrangement withholds under the RWT rules an amount of tax for a replacement payment.

  2. The amount of tax withheld—

  3. is treated for the share supplier as an imputation credit attached to the replacement payment in addition to an imputation credit that the share user attached to the payment under section OB 64 (Replacement payments); and
    1. does not give rise under section LB 3 (Tax credits for resident withholding tax) to a tax credit or refund for the share supplier.

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