Companies Limitations of Distributions Regulations 1976

This commentary item was published in Public Information Bulletin Volume 88, November 1976

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Excess Retention Tax — The Companies (Limitation of Distributions) Regulations 1976

Regulations which came into force on 15 May 1976 and which continue in force until midnight on 14 May 1977 place restrictions on the declaration of dividends.

The Commissioner has decided that, until the Regulations limiting any increase in dividends expire, the Inland Revenue Department will defer the assessment of excess retention tax on any company which, by reason of the dividend limitation, is unable to declare sufficient dividends to avoid the tax.

Companies will be expected to pay dividends up to the amount allowed under the Regulations. If a company's dividend fall short of this amount then an assessment of excess retention tax will not be deferred.

On the expiry of the dividend limitation, companies will be allowed a reasonable time in which to declare dividends sufficient to cover any shortfall during the limitation period. As a general rule this extension of time may be taken as ending 10 months after the balance date next following the expiry of the Regulations.