Imputation Credit Account (ICA) Note (NZ Stat Reporter)

Imputation lets a company share the tax it has paid on its income with shareholders when it pays dividends.

Most New Zealand resident companies must keep an imputation credit account (ICA).

An ICA is a record-keeping account used to keep track of how much income tax the company has paid, and how many imputation credits it still holds that it can pass on to its shareholders.

How it works:

When a company pays income tax, it gains the same amount of imputation credits in its ICA.

When a company pays dividends to its shareholders, it can choose to attach some of its imputation credits to the dividends - it can impute the dividends. This creates a debit of the same amount in the ICA.

Some other credits and debits are entered in the ICA, including:

• residential land withholding tax (RLWT) deducted from the sale of residential property
• resident withholding tax (RWT) from interest or dividends the company has received.

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There are two Imputation Credit Account (ICA) notes available in Stat Reporter. These are:

By default, the NTD version is selected at Practice Level and the more detailed version is not selected, meaning it will not show in the list of available reports for a client. This can be changed at Practice level or for individual clients.

Detailed Imputation note

The detailed Imputation Note uses a specific account group in the Other financial accounts section.

For an AO Classic general ledger chart of the accounts, the mapping is:

• 996//80 is the Opening Balance of the ICA brought forward from last year.
• 996/81-996/89 is a range of accounts to cover other movements in the ICA, the most common of being Imputation Credits attached to Dividends paid.Note the mapping for a standard AO Classic chart.
• 631/02-631/05 are the various accounts used to capture tax paid during the year.

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Imputation credits attached to Dividends paid

These are an “off balance sheet” item and can be adjusted through the use of Information accounts. For AO Classic, the entry would be:

• Credit 996/81 Imputation credits on dividends paid.
• Debit 996/99 Information accounts contra

Imputation credits attached to Dividends received

There are two ways to handle ICs on Dividends received

a) To Gross up dividends received income in the Income Statement.

When dividends are received, the journal entry would be:

Credit 272 Dividends received
• Debit 631/04 Dividend withholding tax on dividends received.
• Debit 631/05 Imputation Credits on dividends received.
• Debit 600 Bank account
This approach requires no additional adjustments or mapping, will work in both the Tax Note and the Imputation Credit Account note.

b) To show the Dividends received at the net amount in the Income Statement

With this approach, dividends received are shown at the net amount received (including any withholding tax), and the difference between accounting profit and taxable income is adjusted for in the Tax Note as a permanent difference. There are several pieces here:

• The Imputation Credits on Dividends received will be loaded into an “off balance sheet” account.
  Debit 996/82 Imputation Credits on Dividends received
  Credit 996/99 Contra
• 996/82 can be mapped to Other financial information -> Tax Note -> Non-assessible non-deductible for the Tax Note, and also to Other financial information -> Imputation -> Other for the ICA. If this is done at practice level, it will not trigger a duplicate mapping message when reports are generated.

It is also necessary to account for the amount of Dividend Imputation Credits that can be claimed against this year’s tax:

• Debit 996/90 Imputation Credits utilized this period
• Credit 996/99 Contra

This will usually be the same as the amount debited to 996/82, but needs to be a different account in case there are excess Imputation Credits that cannot be utilized. 996/90 does not affect the ICA note, but will be need to be taken into account in the tax reconciliation note.
<the tax note requires change before this approach will work>