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Income Tax Act 2007

General collection rules - Withholding tax on resident passive income (RWT)

RE 12: Interest

You could also call this:

"How to calculate tax on interest payments"

Illustration for Income Tax Act 2007

When you make a payment of resident passive income that is interest, this section applies. You must calculate the tax to withhold and pay using a formula. The formula is the tax rate times the interest paid and foreign withholding tax, minus the foreign withholding tax. The tax rate is found in schedule 1, part D, clause 3 or 4. Interest paid is the interest before tax is determined. Foreign withholding tax is the tax paid or payable on the interest. You can choose to use a tax rate of 0.38 if the payment is made in the 2009–10 tax year and the normal tax rate would be 0.39. You can also choose to use a tax rate of 0.30 if the payment is made in the 2010–11 tax year to a portfolio investment entity or a company that is not a Maori authority, and the normal tax rate would be 0.33.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1520225.

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Part RGeneral collection rules
Withholding tax on resident passive income (RWT)

RE 12Interest

  1. This section applies when a person makes a payment of resident passive income that consists of interest.

  2. The amount of tax for the payment that the person must withhold and pay to the Commissioner is calculated using the formula—

    (tax rate × (interest paid + foreign withholding tax)) − foreign withholding tax.

    Where:

    • In the formula,—

    • tax rate is the basic rate set out in schedule 1, part D, clause 3 or 4 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe benefits):
      1. interest paid is the interest paid before the amount of tax is determined:
        1. foreign withholding tax is the amount of foreign withholding tax paid or payable on the interest paid.

          1. Despite subsection (3)(a), the amount of tax that the person must withhold and pay may, if the person chooses, be calculated, under subsection (3), using a tax rate of 0.38 if—

          2. the payment of resident passive income is made in the 2009–10 tax year; and
            1. the tax rate under subsection (3)(a) would be 0.39 in the absence of this subsection.

              1. Despite subsection (3)(a), the amount of tax that the person must withhold and pay may, if the person chooses, be calculated under subsection (3) using a tax rate of 0.30 if—

              2. the payment of resident passive income that consists of interest is made in the 2010–11 tax year to—
                1. a portfolio investment entity; or
                  1. a company that is not a Maori authority; and
                  2. the tax rate under subsection (3)(a) would be 0.33 in the absence of this subsection.

                    Compare
                    Notes
                    • Section RE 12(3)(a) tax rate: amended (with effect on 1 April 2008), on , by section 530(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                    • Section RE 12(3)(a) tax rate: amended (with effect from 1 April 2008), on , by section 33(1) of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).
                    • Section RE 12(3)(a) tax rate: amended, on , by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                    • Section RE 12(4) heading: added, on , by section 33(2) of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).
                    • Section RE 12(4): added, on , by section 33(2) of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).
                    • Section RE 12(5) heading: added, on (applying for the 2010–11 income year), by section 108(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                    • Section RE 12(5) heading: amended (with effect on 1 April 2010), on , by section 115(1) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
                    • Section RE 12(5): added, on (applying for the 2010–11 income year), by section 108(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                    • Section RE 12(5)(a): substituted (with effect on 1 April 2010), on , by section 115(2) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
                    • Section RE 12(5)(a)(ii): amended, on , by section 258 of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
                    • Section RE 12 list of defined terms company: inserted (with effect on 1 April 2008), on , by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                    • Section RE 12 list of defined terms income year: inserted (with effect on 1 April 2008), on , by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                    • Section RE 12 list of defined terms Maori authority: inserted (with effect on 1 April 2010), on , by section 115(3) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
                    • Section RE 12 list of defined terms portfolio investment entity: inserted (with effect on 1 April 2008), on , by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                    • Section RE 12 list of defined terms trustee: repealed, on , by section 258 of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).