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HMRC internal manual

Double Taxation Relief Manual

From
HM Revenue & Customs
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DT: New Zealand: double taxation agreement, Article 11: Dividends

 

The whole of Article 11 was replaced by SI 2004/1274. It has effect in respect of New Zealand dividends from 1 April 2005.

(1) Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State.

(2) However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that State, but if the beneficial owner of the dividends is a resident of the other Contracting State, the tax so charged shall not exceed 15 per cent of the gross amount of the dividends.

This paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.

(3) The term “dividends” as used in this Article means income from shares, or other rights, not being debt-claims, participating in profits, as well as income from other corporate rights which is subjected to the same taxation treatment as income from shares by the laws of the Contracting State of which the company making the distribution is a resident and also includes any other item which, under the laws of the State of which the company paying the dividend is a resident, is treated as a dividend or distribution of a company.

(4) The provisions of paragraphs (1) and (2) of this Article shall not apply if the beneficial owner of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State of which the company paying the dividends is a resident, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 8 or 15 of this Convention, as the case may be, shall apply.

(5) Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company, except insofar as such dividends are paid to a resident of that other State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or a fixed base situated in that other State, nor subject the company’s undistributed profits to a tax on undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in that other State.

(6) The provisions of this Article shall not apply if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the shares or other rights in respect of which the dividend is paid to take advantage of this Article by means of that creation or assignment.

The former Article 11 was as follows:

(1)

 

  1. Dividends derived from a company which is a resident of the United Kingdom by a resident of New Zealand may be taxed in New Zealand.
  2. Where a resident of New Zealand is entitled to a tax credit in respect of such a dividend under paragraph (2) of this Article tax may also be charged in the United Kingdom and according to the laws of the United Kingdom, on the aggregate of the amount of the dividend and of that tax credit at a rate not exceeding 15 per cent.
  3. Except as aforesaid dividends derived from a company which is a resident of the United Kingdom and which are beneficially owned by a resident of New Zealand shall be exempt from any tax in the United Kingdom which is chargeable on dividends.

(2) An individual who is a resident of New Zealand and who derives dividends from a company which is a resident of the United Kingdom shall, provided he is the beneficial owner of the dividends, be entitled to the tax credit in respect thereof to which an individual resident in the United Kingdom would have been entitled had he derived those dividends, and to the payment of any excess of such credit over his liability to United Kingdom tax. Any such credit may be treated for the purposes of New Zealand tax asassessable income from sources in the United Kingdom.

(3) Dividends derived from a company which is a resident of New Zealand and which are beneficially owned by a resident of the United Kingdom may be taxed in the United Kingdom. Such dividends may also be taxed in New Zealand but the tax so charged shall not exceed 15 per cent of the gross amount of the dividends.

(4) The term `dividends` as used in this Article includes any item which, under the law of the Contracting State of which the company paying the dividend is a resident, is treatedas a dividend or distribution of a company.

(5) Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company, except insofar as such dividends are paid to a resident of that other State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment situated in that other State, nor subject the company’s undistributed profits to a tax on undistributed profits even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in that other State.