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RWT Guide — Resident Withholding Tax on Interest and Dividends in NZ

the Resident Withholding Tax (RWT) in New Zealand. The guide covers the RWT on interest from the bank accounts and the term deposits, the RWT on dividends, the RWT rates and the election options, and how to claim the RWT credits in the annual tax return.

RWT on Interest

The RWT (Resident Withholding Tax) is deducted by the banks and the financial institutions on the interest income earned by the New Zealand residents. The standard RWT rates include: 33% if no rate election is made, but the depositor can elect a lower rate of 10.5%, 17.5%, or 30% by completing the IRD tax rate notification (the IR461 form). The elected rate should match the depositor's marginal tax rate to avoid the top-up tax or the refund at the year-end. The RWT on interest is a final tax for most individuals unless the total income exceeds $14,000 in which case the interest is included in the annual assessment.

RWT on Dividends

The RWT on dividends is deducted by the companies paying the dividends at the rate of 33%. The New Zealand companies also attach the imputation credits (the "dividend imputation") reflecting the tax paid by the company at the corporate rate of 28%. The combined RWT and the imputation credits ensure that the dividend income is taxed at the shareholder's marginal rate. The shareholders can elect the RWT rate through the IR481 form. The dividends from the foreign companies are subject to the different rules under the FIF regime.