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Income Tax Act 2007

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

RF 12B: Interest derived jointly with residents

You could also call this:

“Tax on interest shared with someone else”

When you get interest from a payment and you are sharing it with someone else, the tax on that payment is calculated using a formula. The formula uses the tax rate, the amount of interest paid, and any foreign withholding tax that was paid. You can find the tax rate in schedule 1, part D, clause 3 or 4 of the Income Tax Act.

If you are a New Zealand resident and you are sharing the interest with someone else, you are treated as a filing taxpayer for tax purposes. This means that the tax rules apply to you as if you were filing a tax return. Interest that is shared can include interest that is earned by partners in a business partnership.

There is an exception to this rule if the interest is earned by a non-resident who is a limited partner in a limited partnership, even if one of the other partners is a New Zealand resident. In this case, the tax rules do not apply in the same way.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM2627286.

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

RF 12BInterest derived jointly with residents

  1. If a person makes a payment of non-resident passive income that consists of interest derived by 2 or more persons jointly and at least 1 person deriving the interest is a New Zealand resident, the amount of tax for the payment 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 amount of 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 amount of interest paid.

          1. For the purposes of this section, the New Zealand resident referred to in subsection (1) is treated as a filing taxpayer.

          2. Interest derived by 2 or more persons jointly includes interest derived by partners in a partnership.

          3. Despite subsection (1), this section does not apply to a payment of non-resident passive income that consists of interest derived by a non-resident as a limited partner in a limited partnership when 1 or more of the partners in that partnership is a New Zealand resident.

          Compare
          Notes
          • Section RF 12B: inserted (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 12B(4) heading: inserted (with effect on 1 April 2008), on , by section 129(1) (and see section 129(3) for application) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
          • Section RF 12B(4): inserted (with effect on 1 April 2008), on , by section 129(1) (and see section 129(3) for application) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
          • Section RF 12B(5) heading: inserted (with effect on 1 April 2008), on , by section 129(1) (and see section 129(3) for application) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
          • Section RF 12B(5): inserted (with effect on 1 April 2008), on , by section 129(1) (and see section 129(3) for application) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
          • Section RF 12B list of defined terms limited partner: inserted (with effect on 1 April 2008), on , by section 129(2) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
          • Section RF 12B list of defined terms limited partnership: inserted (with effect on 1 April 2008), on , by section 129(2) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
          • Section RF 12B list of defined terms non-resident: inserted (with effect on 1 April 2008), on , by section 129(2) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
          • Section RF 12B list of defined terms partner: inserted (with effect on 1 April 2008), on , by section 129(2) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
          • Section RF 12B list of defined terms partnership: inserted (with effect on 1 April 2008), on , by section 129(2) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).