The imputation rules have been amended to extend the circumstances when tax overpaid before a breach in shareholder continuity can be refunded.
2006 amendment clarifies that most companies cannot maintain an imputation credit account if they are treated as not being resident in NZ under a DTA.
Section ME 1 of the Income Tax Act 2004
Section ME 1(2)(b) has been amended to clarify that companies (other than Australian imputation credit account companies) cannot maintain an imputation credit account if they are treated as not being resident in New Zealand under a double tax agreement.
Previously, section ME 1(2)(b) provided that a company must not establish and maintain an imputation credit account if it was resident in New Zealand but not subject to tax on all or part of its income under a double tax agreement when it was, for the purposes of that agreement, treated as not being a resident of New Zealand.
There was a risk that the reference to the company being "not subject to tax in respect of all or part of its income under a double tax agreement" could have been interpreted as narrowing the circumstances in which a company was prevented from maintaining an imputation credit account. A company that was treated as being not resident in New Zealand under a double tax agreement, but that did not actually have any income that was exempted from tax as a result, may have considered itself outside the scope of section ME 1(2)(b).
The amended version of section ME 1(2)(b) puts beyond doubt that this provision applies to all resident companies treated as not being resident under a double tax agreement, irrespective of whether they have income that is exempted from tax as a result. The drafting of this provision is now more closely aligned with that of equivalent provisions elsewhere in the Act.
Other sections in this legislation
| Offshore investment | Tax rules for PIEs | Tax on geothermal wells | Australian superannuation fund exemption | New rules for selecting SSCWT rates | Allowing documents to be removed for inspection | Military and police allowances | New rules for spreading income on the sale of patents | Organisations approved for charitable donee status | Consolidated groups and foreign losses | Assessments by the Commissioner | GST and financial services | GST on fringe benefits | GST grouping rules | Taxation of business environmental expenditure | Family assistance provisions | Rewrite amendments | Tax depreciation treatment of patents | Fringe benefit tax | Depreciation formula | Economic rate of depreciation | Calculating depreciation rates | Election to depreciate | Transitional residents | Death and asset transfers | New GST due date | Limit on refunds and allocations of tax | The imputation system and companies | Reverse takeovers | Changes in GST taxable periods | Miscellaneous technical amendments |