Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

Double Taxation Relief Manual

From
HM Revenue & Customs
Updated
, see all updates

New Zealand: Underlying Tax

(1) Documents needed to support the underlying tax claim

The accounts and the page(s) of the income tax return showing the tax assessed will be required by the Underlying Tax Group. The income tax return which shows the Foreign Investors’ Tax Credit relating to the dividend (if not the same) should also be submitted.

(2) Foreign investors’ tax credit

On payment of a dividend to an overseas shareholder, the New Zealand Inland Revenue issues a Foreign Investors’ Tax Credit against the New Zealand company’s corporation tax. This is paid onto the shareholder as a supplementary dividend.

The Foreign Investors’ Tax Credit reduces the amount of underlying tax the dividend carries (see Statement of Practice 03/01).

Example - Post SP 03/01

Ordinary Dividend NZ $500,000 out of 1999 profits    
       
Supplementary Dividend NZ $ 85,000 out of Foreign Investors’ Tax Credit    
Relevant Profits 600,000    
Add Tax 300,000    
  900,000 33.33%  
Ordinary dividend 500,000 @ 33.33% 249,963
Supplementary dividend  85,000 Foreign Investors’  Tax Credit (85,000)
  585,000   164,963
  164,963    
  749,963 22.00%  

Example - Pre SP 03/01

Ordinary Dividend NZ $500,000 out of 1999 profits      
         
(if more than one year’s profits used, apportion the Foreign Investors’ Tax Credit accordingly)        
Supplementary Dividend NZ $85,000 out of Foreign Investors’ Tax Credit        
Relevant Profits   600,000    
Add Tax   300,000    
Less Foreign Investors’ Tax Credit (85,000)      
    215,000    
    815,000 26.38%  
Ordinary dividend 500,000 @ 26.38% 179,163  
Supplementary dividend  85,000      
  585,000      
      179,163  
  179,163      
  764,163      
    23.45%