TAX ON COMPANIES

Wairarapa Times-Age, 9 November 1938, Page 5

TAX ON COMPANIES

DEMANDS UNDER SECURITY ACT. (By Telegraph—Press Association.) AUCKLAND. November 8. Acting on advice received from the Income Tax Department, an Auckland firm, in taking out its balance on September 30, has made provision for Is in the pound social security tax on profits from April 1, 1938. This is in conformity with the general effect of the Social Security Act that the tax will be levied upon the total income derived by companies after March 31. 1938, and upon any income derived prior to that date if it is distributed in any manner to shareholders. It has. been explained by an authority on company law that in respect of income derived by a company during the year ended March 31, 1939, the Act provides that shareholders will pay the tax on dividends paid during the year out of the income of that year, and the company will pay the tax on the excess of its income over the amount of the interim dividends. Dividends paid after March 31. 1939, are exempt from tax in the hands of the shareholders. An exhaustive definition of the term dividends has the effect of applying it to profits distributed to shareholders in any form such as bonus shares or a surplus above the paid-up capital in the event of winding up. The tax on all such profits will be paid by the company.

There is a final sub-section designed to impose a tax on any profits earned by a company prior to April 1, 1938, ihal mav be distributed after March 31, 1929.