Income Tax Act 2007

RE 2 Resident passive income
Interest, dividends, and certain distributions

(1)

Resident passive income means an amount paid to a person to the extent to which it consists of—

(a)

interest:

(b)

a dividend:

(c)

a taxable Maori authority distribution other than a retirement scheme contribution:

(d)

a replacement payment paid to a person under a share-lending arrangement.

Exclusions and inclusions

(2)

Subsections (3) to (5) override subsection (1).

Exclusions from interest

(3)

The following amounts are excluded from interest under this section:

(a)

exempt interest:

(b)

interest derived by a person who holds an RWT exemption certificate issued under section RE 27:

(c)

interest that is non-resident passive income:

(d)

interest derived from outside New Zealand by a non-resident:

(e)

interest that is exempt income under section CW 27 (Certain income derived by transitional resident):

(f)

interest paid by a company and derived by another company when both companies are part of the same group of companies at the time of the payment:

(g)

interest paid to an intermediary—

(i)

by a client in relation to the operation of a tax pooling account; or

(ii)

by the Commissioner under section RP 18 (Deposits in tax pooling accounts):

(h)

interest payable under section 120D or Part 7 of the Tax Administration Act 1994:

(i)

interest arising because section EI 2 (Interest from inflation-indexed instruments) applies to an inflation-indexed instrument.

Inclusions in interest

(4)

For the purposes of this section, the following amounts are treated as interest and not as a dividend:

(a)

a dividend that a building society pays to a member in relation to a withdrawable share in the society:

(b)

a dividend that a friendly society pays to its member in relation to a share in the society.

Exclusions from dividends

(5)

The following amounts are excluded from a dividend under this section:

(a)

a dividend that is exempt income—

(i)

through the application of either of sections CW 9 and CW 10 (which relate to income from equity); or

(ii)

under section CW 27 (Certain income derived by transitional resident); or

(iii)

under section CW 64 (Exemption under other Acts):

(b)

an amount treated as a dividend under—

(i)

section CB 34(5)(a) (Amounts derived by members from mutual associations); or

(ii)

sections GB 23 to GB 25 (which relate to excessive remuneration):

(bb)

a dividend from a portfolio investment entity:

(c)
[Repealed]

(d)

a dividend derived by a person who holds an RWT exemption certificate issued under section RE 27:

(e)

a dividend that is non-resident passive income:

(f)

a dividend derived by a non-resident other than a dividend that has a source in New Zealand:

(fb)

a dividend paid by a company and derived by another company, if the dividend is fully imputed and the paying company chooses to exclude the dividend from being resident passive income:

(g)

a dividend paid by a company and derived by another company when both are part of the same group of companies at the time of the payment:

(gb)

an amount treated as a dividend under section CB 32C (Dividend income for first year of look-through company):

(h)

a dividend that is excluded income under section CX 50B (Contributions to retirement savings schemes) or would be excluded income under that section in the absence of subsection (2)(a) and (b):

(i)

a dividend other than a non-cash dividend that—

(i)

has an imputation ratio of 30/70 or more; and

(ii)

is paid by a unit trust or group investment fund (or RWT proxy on their behalf) that has not withheld RWT from any earlier dividend:

(j)

a dividend treated as derived by a person under section GB 1(3) (Arrangements involving dividend stripping).

Beneficiary income

(6)

If a person derives an amount described in this section in their capacity as trustee and the amount is beneficiary income, the amount is treated as not derived by the trustee.

Trustees’ RWT substitution payment

(7)

A trustee may pay an amount of money (the RWT substitution payment) to the relevant beneficiary that is equal to or less than the amount of RWT withheld for an amount to which subsection (6) applies (the RPI beneficiary income).

Effect of RWT substitution payment

(8)

The RWT substitution payment is treated as an amount of resident passive income that is beneficiary income, with the same nature as the RPI beneficiary income. There is no liability or obligation to withhold RWT in relation to the RWT substitution payment.

Defined in this Act: amount, beneficiary, beneficiary income, building society, Commissioner, company, dividend, excluded income, exempt income, exempt interest, friendly society, fully imputed, group investment fund, group of companies, imputation ratio, inflation-indexed instrument, interest, New Zealand, non-cash dividend, non-resident, non-resident passive income, pay, portfolio investment entity, replacement payment, resident passive income, RWT, RWT exemption certificate, RWT proxy, RWT substitution payment, share, share-lending arrangement, source in New Zealand, tax pooling account, taxable Maori authority distribution, trustee, unit trust, withdrawable share

Compare: 2004 No 35 s NF 1(2), (4), (5)

Section RE 2(1): amended (with effect on 1 April 2008), on 6 October 2009, by section 525(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section RE 2(1)(c): amended, on 1 April 2008, by section 542(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section RE 2(3)(c): amended (with effect on 1 April 2008), on 6 October 2009, by section 525(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section RE 2(3)(h): amended, on 30 June 2014, by section 140(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).

Section RE 2(3)(i): inserted, on 30 June 2014, by section 140(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).

Section RE 2(5)(a)(i): amended (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 7 May 2012, by section 127(1) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34).

Section RE 2(5)(bb): inserted (with effect from 1 April 2008), on 29 May 2008, by section 44(1) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).

Section RE 2(5)(c): repealed (with effect on 30 June 2009), on 2 November 2012 (applying for income years beginning on or after 1 July 2009), by section 146(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).

Section RE 2(5)(f): amended, on 21 December 2010, by section 129(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).

Section RE 2(5)(fb): inserted, on 1 April 2017, by section 265(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

Section RE 2(5)(g): amended, on 1 April 2008, by section 542(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section RE 2(5)(gb): inserted, on 1 April 2017 (applying for the 2017–18 and later income years), by section 265(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

Section RE 2(5)(h): added, on 1 April 2008, by section 542(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section RE 2(5)(i): added, on 1 April 2008, by section 542(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section RE 2(5)(i)(i): replaced, on 1 April 2017, by section 265(3) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

Section RE 2(5)(j): added (with effect on 1 April 2008), on 7 December 2009, by section 106(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section RE 2(7) heading: added (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years if the trustee has taken a tax position in a tax return that is consistent with subsection (1)), by section 124(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).

Section RE 2(7): added (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years if the trustee has taken a tax position in a tax return that is consistent with subsection (1)), by section 124(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).

Section RE 2(8) heading: added (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years if the trustee has taken a tax position in a tax return that is consistent with subsection (1)), by section 124(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).

Section RE 2(8): added (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years if the trustee has taken a tax position in a tax return that is consistent with subsection (1)), by section 124(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).

Section RE 2 list of defined terms attributed repatriation: repealed, on 24 February 2016, by section 243 of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).

Section RE 2 list of defined terms beneficiary: inserted (with effect on 1 April 2008), on 29 August 2011, by section 124(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).

Section RE 2 list of defined terms combined imputation and FDP ratio: repealed, on 1 April 2017, by section 265(4)(a) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

Section RE 2 list of defined terms derived from New Zealand: repealed, on 21 December 2010, by section 129(2)(a) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).

Section RE 2 list of defined terms excluded income: inserted, on 1 April 2008, by section 542(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section RE 2 list of defined terms FDP ratio: repealed, on 1 April 2017, by section 265(4)(a) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

Section RE 2 list of defined terms fully imputed: inserted, on 1 April 2017, by section 265(4)(b) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

Section RE 2 list of defined terms group investment fund: inserted, on 1 April 2008, by section 542(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section RE 2 list of defined terms imputation ratio: inserted, on 1 April 2008, by section 542(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section RE 2 list of defined terms inflation-indexed instrument: inserted, on 30 June 2014, by section 140(2) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).

Section RE 2 list of defined terms non-cash dividend: inserted, on 1 April 2008, by section 542(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section RE 2 list of defined terms portfolio investment entity: inserted (with effect from 1 April 2008), on 29 May 2008, by section 44(2) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).

Section RE 2 list of defined terms resident in New Zealand: repealed (with effect on 1 April 2008), on 6 October 2009, by section 525(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section RE 2 list of defined terms RWT: inserted, on 1 April 2008, by section 542(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section RE 2 list of defined terms RWT proxy: inserted, on 1 April 2008, by section 542(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section RE 2 list of defined terms RWT substitution payment: inserted (with effect on 1 April 2008), on 29 August 2011, by section 124(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).

Section RE 2 list of defined terms source in New Zealand: inserted, on 21 December 2010, by section 129(2)(b) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).

Section RE 2 list of defined terms unit trust: inserted, on 1 April 2008, by section 542(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).