There are a number of changes proposed in the taxation review, the most obvious of these is the previously mentioned 30/30/30 rule. This would see personal, company and trustee tax aligned to the maximum rate of 30%. Double taxation agreements are also on the plan, with updating some double taxation agreements and aiming to create new ones being the main goal. Imputation credits are set to be reviewed also.

The complete list of changes can be viewed at the Inland Revenue Department’s tax policy website, here.

Current imputation credit regulation allows for New Zealand shareholders to offset their income tax obligation with imputation credits attached to the dividends they receive from a New Zealand income tax paying company. These rules do not currently extend to tax-exempt entities or charities, as they have no income tax obligation which needs to be offset. As this means that unutilized imputation credits are effectively wasted when dealing with tax-exempt entities, there have been numerous calls for revisal of the system.

The New Zealand Government has not ruled out the possibility of imputation credit refunds for tax-exempt entities and charities. While not a definite indicator of change, this is still the initial stage to possible future imputation credit system rethinks.

If the proposed recognition were to be adapted, investors and shareholders will be able to choose in which country they pay the tax on their dividends.

The issue of double taxation on dividends has been raised for many years, and if the proposed regulation were to be approved it would help the processes of further integration of the New Zealand and Australian economies