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Inland Revenue

Tax Policy

Consultation document
Published 16 March 2022

Dividend integrity and personal services income attribution

A Government consultation document seeking feedback on measures to limit the ability of individuals to avoid the 39% personal income tax rate (or the second-highest personal income tax rate of 33%) by diverting their income through entities taxed at a lower rate.

The Government is proposing that:

  • Any sale of shares in a company by the controlling shareholder be treated as giving rise to a dividend to the shareholder to the extent that the company (and its subsidiaries) has undistributed earnings other than capital gains.
  • Companies be required, on a prospective basis, to maintain a record of their available subscribed capital and net capital gains, so that these amounts can be more easily and accurately calculated at the time of any share cancellation or liquidation.
  • The “80 percent one buyer” test for the personal services attribution rule be removed.