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Income Tax Act 2007

Memorandum accounts - Terminating provisions

OZ 12: Tax credits for non-resident investors

You could also call this:

“Rules for tax credits on dividends during a special period”

This section talks about tax credits for companies when they pay or receive dividends during a special time called the transitional period. Here’s what you need to know:

When a company pays or gets a dividend with an imputation credit attached, and the ratio of the credit is between 28/72 and 30/70, some special rules apply. These rules also apply if the company gives out supplementary dividends or is a holding company for supplementary dividends.

If the ratio is exactly 30/70, the company calculates its tax credit using a special formula. They treat 54/119 as if it were 7/17 in this calculation.

If the ratio is less than 30/70, but part of the dividend has a 30/70 ratio, the company uses the same special formula for that part.

When applying some other tax rules about imputation credit ratios, companies should use the 30/70 ratio and the old tax rates.

If a company gets a dividend that fits these rules, they should treat the tax rate as 30% in another calculation about supplementary dividends.

These rules help companies figure out their tax credits correctly during this special transitional period.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1632283.

Topics:
Money and consumer rights > Taxes
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OZ 11: Tax credits for imputation credits, or

“Getting tax credits when you receive dividends from companies”

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OZ 13: Fully credited dividends: modifying actual ratio, or

“Adjusting how fully credited dividends are calculated during a specific period”

Part O Memorandum accounts
Terminating provisions

OZ 12Tax credits for non-resident investors

  1. This section applies when—

  2. a company pays or derives a dividend with an imputation credit attached in the transitional period; and
    1. the dividend and imputation credit, to the extent to which, in the absence of subpart LP (Tax credits for supplementary dividends),—
        1. the imputation ratio is greater than 28/72 and less than or equal to 30/70; and
        2. section LP 2(1) (Tax credits for supplementary dividends) applies to the company, or the company is a supplementary dividend holding company.

          1. For a ratio described in subsection (1)(b)(i) or (ii) that is equal to 30/70, then any tax credit that the company has is calculated using the formula in section LP 2(2), treating 54/119 as 7/17.

          2. For a ratio described in subsection (1)(b)(i) or (ii) that is less than 30/70, then, to the extent to which a part of the amount of the dividend and imputation credit has a ratio of 30/70 through the application of section OZ 8, any tax credit that the company has is calculated using the formula in section LP 2(2), treating 54/119 as 7/17.

          3. In the application of sections GB 35, GB 36, OA 18, OB 60, and OB 61 (which relate to imputation credit ratios) under section LP 5 (Application of benchmark dividend rules and imputation credit ratio), the provisions apply using the ratio 30/70 and the old company tax rates.

          4. If the company derives a dividend to which this section applies, item tax rate in the formula in section LP 8(2) (Relationship with exempt income rules) is treated as 30%, to the extent to which a part of the supplementary dividend was calculated as described in subsection (2) or (3).

          Notes
          • Section OZ 12: added, on , by section 520 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
          • Section OZ 12(1)(b)(i): repealed, on , by section 254(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
          • Section OZ 12(1)(b)(ii): amended, on , by section 19(1)(a) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
          • Section OZ 12(1)(b)(ii): amended, on , by section 19(1)(b) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
          • Section OZ 12(2): amended, on , by section 111(1) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
          • Section OZ 12(2): amended, on , by section 19(2)(a) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
          • Section OZ 12(2): amended, on , by section 19(2)(b) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
          • Section OZ 12(2): amended (with effect from 1 April 2008), on , by section 37(1) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
          • Section OZ 12(3): amended, on , by section 111(2) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
          • Section OZ 12(3): amended, on , by section 19(3)(a) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
          • Section OZ 12(3): amended, on , by section 19(3)(b) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
          • Section OZ 12(3): amended (with effect from 1 April 2008), on , by section 37(2) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
          • Section OZ 12(4): amended, on , by section 254(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
          • Section OZ 12(4): amended, on , by section 19(4) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
          • Section OZ 12(5): amended, on , by section 19(5) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
          • Section OZ 12 list of defined terms combined imputation and FDP ratio: repealed, on , by section 254(3) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
          • Section OZ 12 compare note: repealed (with effect on 1 April 2008), on , by section 119 of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).