Section GB 35 — Income Tax Act 2007: Imputation arrangements to obtain tax advantage

GB 35 Imputation arrangements to obtain tax advantage When section GB 36 applies (1) Section GB 36 applies if an arrangement to obtain a tax advantage arises as described in either subsection (2) or (3). Share disposal or issue arrangements (2) An arrangement is an arrangement to obtain a tax advantage if— (a) the arrangement is for the disposal or issue of shares; and (b) a party to the arrangement might reasonably have expected that a dividend would be paid in relation to the shares with an imputation credit or foreign dividend payment (FDP) credit attached; and (c) a party might reasonably have expected that a party will, or will not, be able to obtain a tax advantage from the credit; and (d) a purpose of the arrangement is that a party will obtain a tax advantage; and (e) the purpose is not a merely incidental one. Dividend or credit streaming arrangements (3) An arrangement is an arrangement to obtain a tax advantage if— (a) the arrangement relates to 1 or more distributions by a company, including bonus issues, during 1 or more tax years; and (b) under the arrangement, the company streams— (i) the payment of dividends; or (ii) the attachment of imputation credits; or (iii) the attachment of FDP credits; or (iv) the attachment of both imputation credits and FDP credits; and (c) the streaming will give a higher credit value to a person who will obtain a tax advantage from the higher credit value than to a person who will not or may reasonably be expected to obtain a lesser benefit. Meaning of higher credit value (4) For the purposes of subsection (3)(c), a dividend has a higher credit value than another dividend if any of the following applies: (a) the dividend has an attached imputation credit and the other dividend does not: (b) the imputation ratio of the dividend is higher than that of the other dividend: (c) the dividend has an attached FDP credit and the other dividend does not: (d) the FDP ratio of the dividend is higher than that of the other dividend: (e) the dividend has attached both an imputation credit and an FDP credit and the other dividend does not have both types of credit attached: (f) the combined imputation ratio and FDP ratio of the dividend is higher than that of the other dividend. Defined in this Act: arrangement , combined imputation and FDP ratio , dividend , FDP credit , FDP ratio , higher credit value , imputation credit , imputation ratio , share , tax advantage , Compare: 2004 No 35 s GC 22(1), (2)