New Zealand Taxation & Financial News » dividend

Views on PDP Change Called For

Editor — Thu, 25 Jun 2009 05:57:14 +0000

The Government has released a document detailing the proposed changes to profit distribution plans, and are calling for public comment.

As announced on the 16th of April, the Government is looking to implement new legislation in regards to Profit Distribution Plans (PDP). Specifically it aimed to deal with the situation under PDP schemes where shares which are given to shareholders by a company are immediately sold back to the company, which not currently covered by tax legislation.

The Government is seeking feed back on the new legislative paper, but with greater eagerness towards the technical aspects of the law change.

The proposal paper can be viewed on the Inland Revenue Department’s Tax Policy website, here.

PDP Taxation to be Clarified

Editor — Fri, 17 Apr 2009 04:51:01 +0000

The Government has released statements saying that they are seeking to clarify matters around taxation of certain profit distribution plans.

According to a media release made by Finance Minister Bill English and Revenue Minister Peter Dunne, the Government is concerned about the taxation consistency found between standard dividend reinvestment plans and bonus issues of shares distributed under profit distribution plans (PDPs).

Regular dividend reinvestment allows receivers to choose between receiving cash dividends or shares. Both options are subjected to the imputation and taxation system. Under certain PDP setups dividends come in the form of share issues, which are immediately sold for cash back to the company. This is not specifically addressed in any sets of tax regulations and therefore escapes taxation.

The Government is concerned about this advantage and claims that it intends to address this problem via further legislation further in the year.

Dunne Comments on FDR Tax

Editor — Thu, 02 Apr 2009 04:20:28 +0000

As a reiteration and a clarification, Revenue Minister Peter Dunne has talked recently about the Fair Dividend Rate (FDR) on overseas investments the and taxation of it.

Revenue Minister Peter Dunne has spoken out about the recent confusion in the media and practitioners about the Fair Dividend Rate. It is the opinion of Peter Dunne that the new FDR will make taxation fairer than those in place earlier.

In his media release Mr. Dunne characterized the new rules via an example. In the case that an overseas investment was to go up from $100,000 to $110,000, the new laws will come into effect with the rise in investment value. Of the $100,000, 5% would be counted as income, to be discerned with under the individual investor’s taxation code. In the years that an investment looses value, there is no taxation. This is also independent of dividends.