Subject to certain exemptions, resident withholding tax (RWT) is imposed on interest and dividend income paid by one resident to another unless the recipient holds a valid certificate of exemption. The rate of deduction on interest paid to individuals can be elected as 10.5%, 17.5%, 30% or 33% depending on the individuals’ income level. Interest paid to companies must be deducted at a rate of 28%. If no tax file number is provided by the individual a rate of 45% will be imposed.
The RWT deducted is credited against the payee’s residual income tax liability for the year. All dividends attract RWT of 33%, however this is reduced by the imputation credits attached to the dividend by the payer.
Dividends, interest and royalties paid by New Zealand residents to non-residents are subject to non-resident withholding tax (NRWT).
The rate of NRWT is 30% in respect of dividends (other than fully imputed non-cash dividends, on which the rate is 0%, and fully imputed or DWP credited cash dividends, in which case it is 15%) and 15% in respect of interest and royalties. As noted above, to the extent that the dividends carry imputation credits, the regime may reduce or eliminate NRWT. Further, NRWT is reduced by virtue of most double tax agreements to a maximum of 15% in respect of dividends and 10% in respect of interest and royalties.
Various other withholdings are required from payments such as directors’ fees, honoraria, salespersons’ commission and non-resident contractors’ fees.