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Tax incentives for migrating companies to go

21 March 2005
Media Statement

Tax incentives for migrating companies to go

The government will legislate to ensure companies pay New Zealand tax on income earned before they migrate from New Zealand, Revenue Minister Michael Cullen announced today.

“Under present law, they can leave without having necessarily paid tax on all the income they earned while resident here.

“This is both unfair and inconsistent with the tax treatment of companies that liquidate as they are subject to tax on a higher proportion of their income,” Dr Cullen said.

“The change will put migrating companies on a par with liquidating companies.
When they migrate, companies will be deemed to have been liquidated at that point and to have paid a dividend to shareholders, upon which they must withhold tax.

“Companies will be allowed to attach imputation credits to these deemed dividends, and – to prevent double taxation – the amount of the distribution can be treated as an additional amount of tax-paid share capital that can be returned to shareholders.

“The change will be included in the next taxation bill to be introduced into Parliament and, once enacted, will be effective from today,” Dr Cullen said.

Details of the proposed change are available in a special report, “Proposed tax rules for migrating companies”, published at www.taxpolicy.ird.govt.

ENDS

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