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Thinking of paying a dividend? Great. In New Zealand, investors love companies that return profits to shareholders—it's often seen as a sign of strong performance and financial confidence. In fact, paying a dividend now and raising capital later, when needed for growth, can be a smarter strategy than holding onto all your profits. It shows discipline, builds trust, and may make future capital raises easier.

But before you send money out the door, make sure you understand how to stay compliant, strategic—and smart about it. Here's a checklist of things to think about:

1. Check the Solvency Test

Under the Companies Act 1993, NZ companies must pass the solvency test before paying a dividend. That means:

2. Decide How Much to Pay

NZ companies have flexibility, but that doesn’t mean you should go overboard. Consider:

Being consistent—paying a similar amount each year or gradually increasing it—is often better than making one big splash, as it helps build trust over time.

Dividends must generally be paid equally to all shareholders of the same class, based on how many shares they hold. Paying different amounts — called differential dividends — is only allowed in certain cases, where the company's constitution allows it and the differential basis is objective. We recommend seeking legal advice before paying differential dividends.

3. Decide when and how to make Payment

You'll need to decide the following key dates:

You could also give investors the option to use their dividends to buy more shares. This keeps more cash in your business while reassuring investors they can still get a return if they want it.

4. Approve the Dividend via Board Resolution

All dividends need a board resolution confirming the amount and type of dividend (interim or final). The resolution also needs to confirm that the solvency test has been passed. Unlike some countries, shareholder approval is not required—unless your constitution says otherwise. You can find an example Board resolution here.

5. Collect tax and bank account details from your investors

If you are managing the payment yourself, you'll need to collect bank account details from all your investors.

You'll also need to know their Withholding Tax rates - either Resident Withholding Tax (RWT) or Non-Resident Withholding Tax (NRWT) rates as applicable.

6. Calculate your withholding tax payable and consider imputation

In New Zealand, Resident Withholding Tax (RWT) generally applies, but 'imputation credits' reduce your shareholders' liability to RWT. Imputation credits are tax credits that you can pass to your shareholders for the tax already paid by the company. The imputation credits are 'attached' to the dividend.

You'll need to include an imputation credit statement so shareholders can claim those credits in their own tax returns.

7. Pay the Dividend

Payments are usually made via direct credit. Make sure your share register is up to date—especially for a fast-growing business. You will need to know the shareholdings of each investor on the record date , not the date you make the payment.

8. Keep Shareholders in the Loop

Don't forget to tell your shareholders what, why, and what's next.

Dividends aren't just cash—they're confidence.

Conclusion

Paying a dividend in New Zealand is simple, but you still have to follow the rules. Nail the compliance, communicate well, and it becomes a powerful way to reward shareholders and show your business means business.

Need help automating your dividends? Get in touch at hello@catalist.co.nz to make use of our automated dividend functionality. We can also automate interest payments and other distributions. PIE compatibility is included. Get in touch to find out more.

Disclaimer:
The information in this blog post is for general informational purposes only and is not intended as legal, financial, or tax advice. While we aim to keep content accurate and up to date, laws and regulations may change and can vary based on individual circumstances. Before making any business, financial, or legal decisions—especially regarding the payment of dividends—you should consult with a qualified professional such as a lawyer, accountant, or financial adviser.

By Colin Magee