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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:

“How to calculate tax on interest earned with New Zealand residents”

When you share interest with someone else, and at least one of you lives in New Zealand, there’s a special way to work out the tax. This applies to what’s called ‘non-resident passive income’.

Here’s how it works: You take the amount of interest paid, add any foreign tax that’s already been taken off, and multiply that by the tax rate. Then you take away the foreign tax again. The answer is how much tax needs to be paid.

The tax rate used in this sum is found in schedule 1, part D, clause 3 or 4 of the law. These clauses talk about basic tax rates for different types of income.

The ‘interest paid’ means all the interest before any tax is taken off. ‘Foreign withholding tax’ is any tax already paid to another country on this interest.

For this part of the law, the person living in New Zealand is treated as someone who needs to file a tax return.

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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.

Topics:

Money and consumer rights > Taxes

Government and voting > Government departments

RF 12: Interest paid by approved issuers or transitional residents, or

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

RF 12C: Amount derived from non-resident life insurer becoming resident, or

“Tax rules when a foreign life insurer moves to New Zealand”

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

RF 12BInterest derived jointly with residents

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):
interest paid is the amount of interest paid before the amount of tax is determined:
foreign withholding tax is the amount of foreign withholding tax paid or payable on the amount of interest paid.

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

Compare

2004 No 35 s NG 2(1)(ab)

Notes

Section RF 12B: inserted (with effect on 1 April 2008), on 6 October 2009, by section 536(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).