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Income Tax Act 2007

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

RE 14B: Combined cash and non-cash dividends

You could also call this:

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

This law explains what happens when you get a dividend that is partly cash and partly something else (like shares). If you’ve chosen to have tax withheld from both parts of the dividend, and the cash part is big enough, here’s what happens:

The person paying you the dividend needs to work out how much tax to withhold. They use a special calculation that looks at the total value of both parts of the dividend, plus any tax credits or foreign tax that’s already been paid.

The calculation works like this: First, they add up the cash and non-cash parts of the dividend, plus any tax already paid or credits attached. Then they multiply this by the tax rate. Finally, they subtract any tax or credits already attached.

The tax rate they use is set out in another part of the law. The dividend amount includes both the cash and non-cash parts. The ‘tax paid or credit attached’ part can include imputation credits (if the company is in New Zealand) or foreign tax (if the company is overseas).

After they’ve done this calculation, they treat the whole dividend (both cash and non-cash parts) as one payment. The amount they calculated is what they need to withhold and pay to the tax office under the RWT (Resident Withholding Tax) rules.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM7289023.

Topics:

Money and consumer rights > Taxes

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

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

RE 14C: Non-cash dividends distributed through intermediaries, or

“Rules for foreign companies passing non-cash dividends through other groups”

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

RE 14BCombined cash and non-cash dividends

This section applies when a person has made an election in accordance with sections RE 13(1B) and RE 14(1B) and the amount of the cash dividend paid at the same time as the non-cash dividend is equal to or greater than the amount calculated by the formula in subsection (2).
The amount of tax for the payment of the cash dividend and the non-cash dividend that the person must withhold and pay to the Commissioner is calculated using the formula—
$(tax rate × (dividends + tax paid or credit attached)) − tax paid or credit attached.$

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):
dividends is the total amount of the cash dividend and the non-cash dividend paid before the amount of tax is determined:
tax paid or credit attached is the total of the following amounts:
1. if a dividend is paid in relation to shares issued by an ICA company, the total amount of imputation credits attached to the dividends:
2. if a 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 total amount of the dividends.

The total amount of the cash dividend and the non-cash dividend is treated as 1 payment of 1 dividend (the combined dividend), and the amount calculated under the formula in subsection (2) is the amount that is required to be withheld from the combined dividend and paid under the RWT rules.

Notes

Section RE 14B: inserted, on 1 April 2017, by section 268 of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).