Imputation credits have become a talking point again in New Zealand for business taxpayers and their shareholders with the publication by the government of a discussion document on their streaming and refundability.
Shareholders in New Zealand companies can use the imputation credits, which come with dividends and reflect the income tax already paid by companies, to offset their tax bills.
The document outlines four key objectives for the government:
· keeping the company tax system as close to a fully integrated system as possible – that is, as far as possible, taxing income derived through companies at the tax rates of the shareholders who own the company at the time the income is derived;
· ensuring that New Zealand source-basis taxation is retained – that is, taxing non-residents on the income that is derived through their investments in New Zealand;
· ensuring that the relevant rules do not stand in the way of legitimate business transactions; and
· continuing to provide a "belt and braces" approach to reducing incentives for company tax to be avoided by continuing to tax domestic shareholders on their unimputed dividends.
"A very important influence on the outcome of this review is the possibility of our entering negotiations with Australia to establish a system of mutual recognition of imputation and franking credits for trans-Tasman investment," said Michael Cullen, minister of finance, and Peter Dunne, minister of revenue, when launching the document. "If mutual recognition does proceed, it would be sensible to make our anti-streaming rules as compatible as possible. This could obviously affect the outcome of this review."
