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CW 7: Foreign-sourced interest
or “Tax exemption for overseas interest income for non-residents”
You could also call this:

“Overseas lenders may not pay tax on interest from loans to NZ government”

If you lend money to the New Zealand government, a local authority, or a public authority, you might not have to pay tax on the interest or payments you get back. This applies to money lent after 29 July 1983.

You won’t have to pay tax on the interest or payments if:

  1. You’re not a resident of New Zealand.
  2. The interest or payment is to be paid outside of New Zealand.
  3. You lent the money to the New Zealand government, a local authority, or a public authority.

If you lent money to a local or public authority, two more things need to be true:

  1. The money must be used for a non-business activity in New Zealand.
  2. The New Zealand government must approve that the interest or payment is tax-free.

This rule also applies to certain commercial bills issued after 29 July 1983, but not to those agreed upon before that date.

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Next up: CW 8B: Certain amounts derived from use of assets

or “Money from using certain assets and how it's taxed”
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Part C Income
Exempt income

CW 8Money lent to government of New Zealand

  1. This section applies to—

  2. interest derived from money lent under a binding contract entered into on or after 29 July 1983; and
    1. a redemption payment made on a commercial bill to which both the following apply; issue is defined in section 2 of the Bills of Exchange Act 1908:
      1. it was issued on or after 29 July 1983; and
        1. it was not issued under a binding contract entered into before that date.

        2. Interest or a redemption payment that is payable outside New Zealand is exempt income if—

        3. it is derived by a person who is a non-resident; and
          1. it is derived from or in relation to money lent to—
            1. the government of New Zealand; or
              1. a local authority or a public authority; and
              2. in the case of money lent to a local or public authority,—
                1. it is lent for the purposes of a non-commercial activity carried on in New Zealand by the local or public authority; and
                  1. the government of New Zealand has approved the exempt status of the interest or redemption payment.

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