Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017

268 New section RE 14B inserted (Combined cash and non-cash dividends)

After section RE 14, insert:

RE 14B Combined cash and non-cash dividends
When this section applies

(1)

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).

Calculation of amount of tax

(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.

Definition of items in formula

(3)

In the formula,—

(a)

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):

(b)

dividends is the total amount of the cash dividend and the non-cash dividend paid before the amount of tax is determined:

(c)

tax paid or credit attached is the total of the following amounts:

(i)

if a dividend is paid in relation to shares issued by an ICA company, the total amount of imputation credits attached to the dividends:

(ii)

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.

Treatment as if amount of tax withheld for 1 combined dividend

(4)

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.