What is Company Tax (New Zealand)?

New Zealand has operated a flat 28% company tax rate since 2011, when it was reduced from 30%. The rate applies to all resident companies on their worldwide income and to non-resident companies on New Zealand-sourced income only.

**Imputation Credit Account (ICA)** The heart of the NZ corporate tax system is the imputation credit account. Every company must maintain an ICA ledger tracking the tax credits available to attach to dividends. When a company pays income tax, its ICA balance increases by the tax paid. When it pays dividends, it attaches imputation credits (reducing the ICA balance) up to the maximum ratio of 28/72 per dollar of cash dividend.

**Maximum Imputation Ratio** The maximum imputation ratio is 28/72, meaning for every NZD 72 of cash paid as a dividend, the company can attach up to NZD 28 of imputation credits. A fully imputed dividend of NZD 72 cash carries NZD 28 of credits, representing a gross dividend of NZD 100. A shareholder paying 28% tax on NZD 100 gross would owe NZD 28, exactly offset by the credit, so there is no further personal tax.

**Over-crediting Consequences** If a company attaches more credits than the 28/72 maximum, the ICA goes into deficit. An ICA in deficit at the company's balance date triggers a 10% imputation penalty tax (formerly 10% deficit tax). This is a significant compliance risk, especially where a company has tax losses or has received exempt income.

**Shareholder Continuity for Losses** To carry forward tax losses from one year to the next, a company must maintain 49% shareholder continuity (the same shareholders holding at least 49% of shares throughout the period). For imputation credits to be carried forward, the continuity requirement is 66%. If continuity falls below these thresholds, losses or imputation credits are forfeited.

**Non-standard Balance Dates** Although the default tax year runs 1 April to 31 March, companies can apply to IRD for a non-standard balance date (for example, 31 December to align with an international parent). IRD grants these where there is a genuine commercial reason.

**Maori Authorities** Maori authorities, which hold and manage assets for the benefit of Maori communities, pay a reduced rate of 17.5% on their income. They have their own credit regime (Maori authority credits) which functions similarly to imputation credits.

**Filing** Companies file the IR4 return via myIR by 7 July (or 31 March of the following year if using a registered tax agent). Losses can be carried forward or carried back one year under the loss carry-back regime introduced in 2020.