Curtis McLean

Previously most companies would not have needed to deduct resident withholding tax (RWT) from dividends paid as the company paid tax at 33% and attached imputation credits to dividends at 33%.

From the start of the 2008/09 income year, the income tax rate for companies was lowered from 33% to 30%. Unfortunately the rate of tax on dividends was not reduced to 30% and still remains at 33%.

There is a transition period up to 31st March 2010, during which time you are able to continue imputing dividends at the old rate of 33% to allow you to use up any imputation credits that relate to company income tax at 33%.

To take full use of the transition period please contact us and we will review the level of dividends you should be paying prior to 31st March 2010.

Once these transitional imputation credits are used up, companies will be required to deduct RWT from dividends to cover the difference between imputation credits at the new company income tax rate (30%) and the RWT rate payable on dividends (33%).

The RWT payable on dividends is required to be paid to IRD on the 20th of the month following payment of the dividend.

You will not need to specifically register in advance as a payer of RWT on dividends. IRD will automatically register you when you submit your payment.

If we currently complete your dividend documentation for you we will calculate when you need to start deducting RWT on dividends, complete all the necessary paperwork associated with these changes and advise the amount of tax to pay.

If you complete your own dividend documentation please contact us if are unsure how these changes may affect you and when you will be liable to deduct RWT on dividends you are paying.

If you have any queries at all regarding the above changes please contact your Curtis Mclean adviser.