New Zealand tax residents pay tax on dividends received from share investments in New Zealand and overseas.
What dividend income is
A dividend is a payment a company makes to its shareholders from its profits. Dividends can be paid in cash, shares, or sometimes other benefits.
Dividends are usually taxable income whether they come from New Zealand or overseas.
Dividends from New Zealand companies
When a New Zealand company pays a dividend, they’ll often attach imputation credits and must also withhold resident withholding tax (RWT) and pay it to us for you.
We’ll add the dividend income, imputation credits and RWT credits to your income tax assessment or Individual income return - IR3. You will need to check the amounts are right.
Imputation credits
Imputation credits recognise income tax already paid by the company. They can be passed from a company to its shareholders when a dividend is paid.
Shareholders can use these credits to reduce the amount of income tax they need to pay on the dividend — this means the same income is not taxed twice.
Resident withholding tax
New Zealand companies must also deduct resident withholding tax (RWT) from dividends before they are paid to you. The RWT rate for dividend payments is 33%.
The imputation credits attached to a dividend reduce the RWT the company must withhold.
Sarah owns shares in NZ Manufacturers Limited. The company pays Sarah a $100 dividend, made up of a $72 cash dividend and $28 of imputation credits. NZ Manufacturing Limited must also deduct $5 of RWT and pay this to us, so Sarah receives $67 in cash.
For tax purposes, Sarah includes $100 of dividend income in her tax return and can claim $33 of tax credits ($28 of imputation credits and $5 of RWT).
In most cases, the dividend income, imputation credits and RWT credits are reported to us by the payer and will already be in Sarah's income tax return or income tax assessment. Sarah should check that the amounts are correct.
Dividends from foreign companies
When you get a dividend from a foreign company, whether the amount is taxable in New Zealand depends on if the foreign investment fund (FIF) rules apply.
If you have foreign shares that cost you more than NZ$50,000 (in total) to buy, read our guidance on the FIF rules to work out what rules apply.
When foreign investment fund rules do not apply
When the foreign investment fund rules (FIF) rules do not apply, you usually need to include the dividend in your taxable income. You can usually claim a credit for foreign tax or RWT withheld from the dividend.
In some cases, where a New Zealand custodian holds your foreign shares, RWT is withheld for you. In myIR and on your summary of earnings these dividends show as ‘dividends treated as interest’ rather than ordinary dividends. You should still return them as overseas income. You can claim a credit for the RWT withheld.
If the dividend has not been added to your tax return information, you will need to add it in yourself.
If you receive foreign dividends, you should file an Overseas income summary - IR1261 and calculate any foreign tax credits you can claim.
Dividends paid to non-residents
If you are not a New Zealand tax resident and receive dividends from New Zealand investments, different tax rules apply. These may include non-resident withholding tax or approved issuer levy, depending on your circumstances.
Tax for non-resident taxpayers
Non-cash dividends
Dividends can be paid as cash, goods or services. Dividends paid as goods or services are known as non-cash dividends.
Tax technical advice
You can read more about non- cash dividends on our tax technical website.