ements and intangible property;
q The introduction of a pool method of depreciation for assets
that cost or have a net tax book value of NZ$ 2,000 or less;
q A statutory provision allowing a deduction in the year of
purchase for assets, including intangible property, with a cost of NZ$ 200 or less.
Mining. Special rules apply to the determination of income from the mining of specified minerals. These include accelerated deductions for exploration and development expenditures whether of a capital or revenue nature.
Effective December 16, 1991, an immediate deduction is
available for all exploration expenditure on petroleum mining ventures. Development expenditure can be deducted over a seven-year period commencing from the year incurred for offshore developments and from the first year of commercial production for onshore developments.Research and Development. Scientific or industrial research expenditures are deductible in full in the year incurred. The cost of plant or buildings associated with such research must be capitalized and depreciated at the rate applicable to such assets purchased for other purposes.
Leases. For specified leases of personal property, deductions are allowed to the lessee for depreciation of the leased asset and the interest component of the lease payments (calculated on a reducing-balance basis). Where the leased asset is sold after the termination of the lease, the lessor is assessed tax on any excess not remitted to the lessee of the sales price of the leased asset over any guaranteed residual value.
Annual deductions proportional to the lease term are permitted for aggregate lease payments made under nonspecified leases of personal property.
28.Treatment of Dividends
The definition of dividend?for tax purposes extends beyond the company law concept to capture virtually all benefits provided by a company to a shareholder, including associates. Examples include the provision of property to a shareholder for less than market value, including low-interest loans, or the purchase of property from a shareholder for more than market value. Effective April 1, 1993, the following generally will not constitute dividends?for tax purposes:
q Benefits provided to downstream associate companies or between sister companies in a wholly owned group of companies;
q Benefits provided to an associated company by making available company property for inadequate consideration (other than making a low-interest loan) if the benefit does not exceed NZ$ 10,000 per annum.
An imputation system applies to most dividends paid by resident
corporations (i.e., dividends can carry a credit for New Zealand tax paid at 33% at the corporate level). Prior to payment of a benchmark dividend, corporations must determine the ratio of the imputation credits attached to the dividend paid. The imputation ratio of subsequent dividends paid in the year must be made to the same extent unless a statutory declaration is lodged. If the tax credit carried by a dividend paid to resident shareholders (other than certain exempt
categories of shareholders) is less than 33%, resident corporations are obliged to deduct withholding tax until the total imputation credits and withholding tax come to 33% and notify the shareholder of the amount of the dividend and the categories of credit attached. The gross amount of the dividend is taxable, while the credits may be applied against income tax payable.
All dividends received by resident individuals comprise taxable income. Dividend income derived by one resident company from another resident company is taxable in the hands of the recipient except if the dividends are paid between two companies that are a wholly owned group of companies, provided they share a common balance date or can reasonably justify having different balance dates.
To the extent dividends received carry imputation credits, they are taken into account in determining the ability of the recipient corporation to impute dividends paid to its own shareholders.
Foreign Dividend Withholding Payments. Dividends received by resident corporations from nonresident corporations are exempt subject to certain exceptions. However, the recipient corporation is liable to a 33% withholding payment on such dividends reduced by a credit for any foreign withholding tax. In circumstances where the dividend is received from a CFC (see item 8), branch equivalent tax account credits
may remove liability to the withholding payment. Tax loss corporations may avoid the payment by electing to reduce losses. This regime was extended to include certain nondividend repatriations?by CFCs, effective July 2, 1992.
Effective September 28, 1993, a New Zealand company may claim a tax credit for underlying foreign tax paid by a
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