Tax & Companies

Taxation of Dividends
The dividend imputation system removed the old problems of double taxation of company profits. The old difficulties arose when the company paid tax on the dividends issued to its shareholders and then the shareholders paid tax again when the dividends were declared as part of their income in their individual tax returns.

The new system now means that dividends are ‘imputed’ with the tax that is already paid by the company on its profits (distributed as dividends) so that shareholders were able to offset the credit for this imputed tax against their own tax liability on that income.

A New Zealand resident is not entitled to the benefit of any imputation credit under a foreign tax system. However, from 1 October 2003 a New Zealand resident who receives dividends from an Australian resident company was able to benefit from New Zealand imputation credits.

Company Tax Return
Every company (except certain non-active companies) have to file a return of income for each income year. This is filed on the IR5 form and must be accompanied by a copy of the company’s statement of financial position (profit & loss accounts and balance sheets) plus whatever other forms are necessary to answer the matters addressed in the IR4 tax form.

The time by which the company’s tax return has to be filed will depend upon the company’s balance date. The tax return must show the company’s world wide income if it is a resident company and only the income derived in New Zealand if it is a non-resident company.

If the company has been liquidated, it needs to file a return from the period which was the beginning of the income year to the date of liquidation or dissolution.

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Some content was obtained from the IRD and incl without change to ensure total accuracy and compliance with current law.