Imputation credit account (ICA)

What is imputation?

Imputation is a system that lets companies (specifically, entities whose income is taxed at the company rate - see Taxing companies for the list) pass on to their shareholders the benefit of the New Zealand income tax they have already paid. Companies can do this by "imputing" credits for the income tax the company has already paid. That is, they attach tax credits to the dividends they pay out. The amount imputed is called an imputation credit. The credits are included in the total of the shareholder's taxable income. A shareholder can claim the credits they have received to offset the tax they are liable to pay on that dividend income.

New Zealand and Australia operate similar imputation systems. See Comparison of Australian and New Zealand imputation.

What is an ICA?

An ICA is a memorandum account that a company keeps, to record the imputation credits that it:

• gains, for example, generated by paying income tax, or attached to imputed dividends it receives as a shareholder of another company, and
• distributes attached to dividends.

A company uses the ICA to keep track of its imputation credits and debits: this information is critical for the company to ensure it can observe the rules around imputation and file an accurate imputation return.

Who must keep an ICA?

If you are an Australian company, you can elect to keep a New Zealand ICA. If you choose to do so, you must observe the same imputation rules as a New Zealand company. See Trans-Tasman imputation credit account for more information.

Find out more

For more information about:

• imputation please see our booklet Imputation (IR274).
• the effects on imputation of the recent company tax rate change please see our Imputation and the company tax rate change fact sheet (IR237).

Date published: 18 Mar 2008

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