Section RM 21 — Income Tax Act 2007: Refunds when loss balances used to reduce net income

RM 21 Refunds when loss balances used to reduce net income When subsection (2) applies (1) Subsection (2) applies when a company that is liable to pay FDP to the Commissioner has a loss balance that may be used under sections IA 2 to IA 9 (which relate to the treatment of tax losses) to reduce its net income for the income year in which the foreign dividend is paid. Refund (2) The company is entitled to a refund of an amount equal to the least of the following, as applicable: (a) the amount of FDP that the company pays in the income year in which the foreign dividend is paid; or (b) the amount of the loss balance multiplied by the basic rate of income tax set out in schedule 1, part A, clause 2 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe benefits) for the income year in which the foreign dividend is paid; or (c) the credit balance of the company’s FDP account at the end of the tax year that has just ended. Group company’s tax loss (3) This section also applies, treating the group of companies as the company, when— (a) a company ( group company A ) pays FDP to the Commissioner; and (b) another company ( group company B ) that is part of the same group of companies as group company A, has a tax loss for the income year in which the foreign dividend is paid or an earlier income year that may be used under sections IA 2 to IA 9 to reduce the net income of group company A; and (c) group company B makes the tax loss available so that group company A is able to get a refund of some or all of the payment. Application and return requirements (4) For this section to apply,— (a) the company must apply to the Commissioner in writing; and (b) the company must meet the return requirements of section 71B of the Tax Administration Act 1994 for the income year in which the dividend is paid; and (c) if group company B’s tax loss is used, group company B must make an election to use the tax loss in writing. Reduction in tax loss (5) When a refund is paid under this section, the amount of tax loss is reduced by an amount calculated using the formula— refund tax rate. Definition of items in formula (6) In the formula,— (a) refund is the amount of the refund paid to group company A under this section: (b) tax rate is the basic rate of income tax set out in schedule 1, part A, clause 2 for the income year that corresponds to the tax year referred to in subsection (2)(c). Late payment penalties (7) Group company A is entitled to a refund of a late payment penalty imposed under section 139B of the Tax Administration Act 1994 in relation to the failure to pay the amount that is refunded. Defined in this Act: amount , Commissioner , company , corresponding income year , foreign dividend , FDP , FDP account , group of companies , income tax , income year , loss balance , net income , pay , tax loss , tax year , Compare: 2004 No 35 s NH 4(5), (6) Section RM 21(2)(b): amended, on 1 April 2008, by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).