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LAWCOMM 403 long notes.docx
LAWCOMM_403_long_notes.docx
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LAWCOMM 403 long notes.docx-CONTENTS Tips ...........
LAWCOMM_403_long_notes.docx-CONTENTS Tips ......................................................................................................................................................................................... 4 Introducon ............................................................................................................................................................................
LAWCOMM 403 long notes.docx-CONTENT...
LAWCOMM_403_long_notes.docx-CONTENTS Tips ......................................................................................................................................................................................... 4 Introducon ............................................................................................................................................................................
Page 122
Any of these forms of taxable income can be used by the shareholder to negate the loan – the loan is
negated by the gross amount of that income (i.e. before tax)
Example
A shareholder borrows $1000 interest-free from the company during the 2021 income year
In the same year, the company pays the shareholder a fully imputed dividend of $200 that is
applied to repay part of the loan
As the repayment is made in the same year that the loan was provided, the
shareholder is deemed to have made the repayment on the day the loan was made,
and any dividend arising from the interest-free loan will reduce accordingly
In the 2022 income year, the company pays the shareholder another fully imputed dividend
of $200 that is also applied to repay part of the loan
As the repayment is made in a different income year to the year the loan was
provided, the repayment is treated as being paid at the start of the company’s 2022
tax year (as it is later than the day the loan was made)
If the property is not a loan:
o
The amount of the dividend for each quarter is the value of the fringe benefit that would arise under the fringe
benefit rules if the benefit was provided to an employee (
secon CD 39(4)
)
o
If the dividend is to:
An employee shareholder:
If the company elects to treat the benefit as a dividend under secon CX 17(2), then it is
taxed as a dividend (
secon CD 20(1)
)
If the company has imputaon credits, it might want to treat the benefit as a
dividend
If the company does not elect to treat the benefit as a dividend, it is a fringe benefit and not
a dividend (
secon CD 12(1)
)
A company might treat the benefit as a fringe benefit rather than as a dividend for
tax reasons – if it does not have imputaon credits, the fringe benefit tax rules may
be more advantageous
A non-execuve director (i.e. not a CEO, COO, CFO etc.)
The benefit is taxed as a dividend (
secon CD 20(2)
)
CROSS-BORDER DIVIDENDS
If a New Zealand company pays a dividend to:
o
Resident individuals – they are taxed normally with imputaon credits aached or RWT deducted (
secon CD
1
)
o
Resident companies – they are also taxed like individuals (but wholly owned groups are exempt (
secon CW
10(1)
))
o
Non-resident individuals or companies – they are subject to non-resident withholding tax at 30% or 15%
If a foreign company pays a dividend to:
o
A resident individual, they are subject to New Zealand tax (with a credit for any foreign withholding tax)
o
A resident company, they are exempt from New Zealand tax (
secon CW 9
)
TAXATION OF TRUSTS
The taxaon of trusts is contained in subpart HC
DUAL DERIVATION PRINCIPLE
HC 5
Amounts derived by trustees
(1)
An amount of income derived in an income year by a trustee of a trust is either
—
(a)
beneficiary income under secon HC 6; or
(b)
trustee income under secon HC 7.
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