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RF 3: Obligation to withhold amounts of tax for non-resident passive income
or “You must deduct tax when paying overseas residents for certain types of income”
You could also call this:

“Tax on overseas income received by New Zealand agents or institutions”

When someone in New Zealand, like an agent or a custodial institution, receives money for you from outside New Zealand, they might need to take out some tax. This is called non-resident passive income.

If the person who sent the money didn’t take out all the tax they should have, the agent or institution in New Zealand must take out the rest of the tax and pay it to the government. They have to do this as soon as they get the money.

If the person sending the money did take out the right amount of tax, they need to tell the agent or institution in New Zealand how much they took out. They should do this when they send the money.

Sometimes, a custodial institution (a place that looks after money for people) can ask someone else to take out the tax and pay it to the government. But if that other person doesn’t do it, the custodial institution still has to.

When your money goes through several custodial institutions before it gets to you, the last one can ask one of the earlier ones to take out the tax. If they agree, then that earlier institution becomes responsible for paying the tax to the government.

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Next up: RF 5: When amounts of tax already withheld

or “When you don't need to deduct tax if it's already been withheld”
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Part R General collection rules
Withholding tax on non-resident passive income (NRWT)

RF 4Non-resident passive income received by agents and others

  1. This section applies when—

  2. an agent, custodial institution, or other person in New Zealand receives a payment of non-resident passive income on behalf of a person entitled to the payment; and
    1. some or all of the amount of tax for the payment has not been withheld.

      1. The agent, custodial institution, or other person must withhold the amount of tax referred to in subsection (1)(b) for the payment and pay it to the Commissioner. The obligation to withhold arises at the time of receipt.

      2. If, in the circumstances described in subsection (1)(a), the person paying the non-resident passive income has withheld the amount of tax for the payment, they must notify the agent, custodial institution, or other person of the amount withheld. Notification must be made at the time the payment is made.

      3. A custodial institution that is required to withhold an amount of tax for a payment may, before the date on which the payment is received by the institution, enter into an agreement with another person (person B) for person B to withhold the amount of tax and pay it to the Commissioner. However, if person B does not withhold the amount of tax and pay it to the Commissioner, the withholding obligation remains with the custodial institution.

      4. When a payment of investment income is paid on or transferred through interposed custodial institutions before being paid to an end investor, the custodial institution that is last in the chain may enter into an agreement with another custodial institution that precedes them in the chain, for the latter institution to withhold the amount of tax for the payment and pay it to the Commissioner. In this case, the withholding obligation passes to the latter institution, and the final custodial institution’s obligation is discharged.

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      Notes
      • Section RF 4(1)(a): amended, on , by section 183(1) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
      • Section RF 4(2) heading: amended, on , by section 183(1) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
      • Section RF 4(2): amended, on , by section 183(1) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
      • Section RF 4(3) heading: amended, on , by section 183(1) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
      • Section RF 4(3): amended, on , by section 183(1) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
      • Section RF 4(4) heading: inserted, on , by section 183(2) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
      • Section RF 4(4): inserted, on , by section 183(2) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
      • Section RF 4(5) heading: inserted, on , by section 183(2) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
      • Section RF 4(5): inserted, on , by section 183(2) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
      • Section RF 4 list of defined terms amount: inserted, on , by section 183(3) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
      • Section RF 4 list of defined terms custodial institution: inserted, on , by section 183(3) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
      • Section RF 4 list of defined terms end investor: inserted, on , by section 183(3) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
      • Section RF 4 list of defined terms investment income: inserted, on , by section 183(3) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).