IR4 Question 29E Foreign investor tax credit

The foreign investor tax credit rules reduce the combined income tax and NRWT imposed on foreign investors with interests in a New Zealand company. See Tax Information Bulletin (TIB) Vol 20, No 3 (April 2008) for details about the change of company tax rate. A company is entitled to a foreign investor tax credit when it pays a supplementary dividend of the same amount to its non-resident shareholders. The foreign investor tax credit can then be offset against the company’s income tax liability.

The foreign investor tax credit arises in the income year the supplementary dividend is paid and is to be offset in the following order:

1. Against the company’s income tax payable for the year the supplementary dividend is paid. Enter this amount in Box 29E.

2. At the company’s election, either:

• against the company’s income tax liability for any of the previous four income years, or

• against the income tax liability for another company in the same wholly owned group of companies for the year the supplementary dividend is paid in or any of the previous four income years.

• Carried forward to subsequent years for offset against the tax liability of the company or another company in the same wholly owned group of companies.

If the company has a foreign investor tax credit that can’t be fully offset against its own income tax liability in the income year the supplementary dividend is paid, attach a note to the front of the return giving details of how to treat any excess credit.