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Income Tax Act 2007

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

RF 12: Interest paid by approved issuers or transitional residents

You could also call this:

“Special tax rules for certain types of interest payments to non-residents”

This section is about interest that doesn’t have to be taxed at the normal rate for non-resident passive income. It applies to two types of interest:

  1. Interest paid by an approved issuer on a registered security. This is only if the person getting the interest isn’t connected to the issuer, except maybe through a special trust. There are some extra rules about this, including what happens if the interest is on a loan from a related party.

  2. Interest paid by someone who recently moved to New Zealand (a transitional resident) on money they borrowed when they didn’t live here. This is only if the interest isn’t for a business in New Zealand and isn’t paid to someone connected to the transitional resident.

For both these types of interest, you don’t have to pay any non-resident withholding tax. The rate is 0%.

The section also says that for the rules about non-resident withholding tax, interest is only counted as paid by an approved issuer on a registered security if it’s treated that way under section 86I of the Stamp and Cheque Duties Act 1971.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1520364.

Topics:
Money and consumer rights > Taxes
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“How to calculate tax on interest earned with New Zealand residents”

Part R General collection rules
Withholding tax on non-resident passive income (NRWT)

RF 12Interest paid by approved issuers or transitional residents

  1. This section applies in relation to an amount of non-resident passive income that consists of—

  2. interest that—
    1. is paid by an approved issuer under a registered security; and
      1. unless the approved issuer is a member of a New Zealand banking group as described in section FE 33 (New Zealand banking group), is derived by a person not associated with the approved issuer except by being a beneficiary of a trust (a security trust) established for the main purpose of protecting and enforcing beneficiaries’ rights under the registered security; and
        1. is not a payment to which section RF 12B applies; and
          1. if the interest relates to related-party debt, is derived at a time when the person is not associated with the approved issuer other than as a beneficiary of a security trust, and the funding provided by the lender under the related-party debt does not meet the requirements in section RF 12H(1)(a)(ii), and the lender does not meet the requirements in section RF 12H(1)(a)(iii):
          2. interest that—
            1. is paid by a transitional resident in relation to money borrowed by them while non-resident; and
              1. is not paid in relation to a business carried on through a fixed establishment in New Zealand; and
                1. is derived by a person not associated with the transitional resident; and
                  1. is not a payment to which section RF 12B applies.

                  2. The rate of NRWT payable on the amount is 0%.

                  3. For the purposes of the NRWT rules, an amount of interest is paid by an approved issuer under a registered security only if it is treated as paid in relation to a registered security under section 86I of the Stamp and Cheque Duties Act 1971.

                  Compare
                  Notes
                  • Section RF 12: substituted (with effect on 1 April 2008), on , by section 536(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                  • Section RF 12(1)(a)(ii): replaced, on , by section 278(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                  • Section RF 12(1)(a)(ii): amended (with effect on 30 March 2017), on , by section 163(1) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
                  • Section RF 12(1)(a)(iii): amended, on , by section 278(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                  • Section RF 12(1)(a)(iv): replaced (with effect on 30 March 2017), on , by section 163(2) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
                  • Section RF 12(3): amended (with effect on 1 April 2008), on , by section 116 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                  • Section RF 12 list of defined terms New Zealand banking group: inserted, on , by section 278(4) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                  • Section RF 12 list of defined terms related-party debt: inserted, on , by section 278(4) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).