Companies use an imputation credit account (ICA) to keep track of:
- how much tax they have paid
- how much tax they’ve passed on to shareholders or had refunded to them.
The balance of the ICA records how much credit for that tax the company can pass on to shareholders.
An imputation credit account is a memorandum or record-keeping account. It is used to complete the company’s imputation returns for each tax year.
Most New Zealand-resident companies need to keep an imputation credit account. Any organisation that is treated as a company for income tax purposes also needs to keep one. This includes:
- unit trusts
- cooperative companies
- life insurance companies
- statutory producer boards
- group investment funds (except for certain income).
You do not need to keep an imputation credit account if you are a:
- company that is not resident in New Zealand
- company that is resident in New Zealand, but treated as non-resident because of a double tax agreement
- trustee company (except any group investment funds deriving category A income)
- company whose constitution prohibits their income or property being distributed to any proprietor, member or shareholder
- local authority
- subsidiary company of the Accident Compensation Corporation to which section 266 of the Accident Compensation Act 2001 applies
- Māori authority
- look-through company (LTC).
If your company’s income is wholly exempt from income tax, you generally will not will not need to keep an imputation credit account. The exception to this is if the income is exempt because it is:
- foreign dividends derived by a New Zealand resident-company or trustee of a group investment fund
- dividends paid before 1 April 1996 to a unit trust manager or a trustee or manager of a group investment fund, or
- inter-company dividends between companies in a 100% commonly owned group.