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Approved issuer levy: General information about AIL and approved issuer status
To be granted approved issuer status, you need to:
- elect to be an approved issuer
- complete the Approved issuer levy (AIL) payer election (IR396) form, and
- have complied with your requirements under all Inland Revenue Acts during the two years before the date we receive the application.
We use the information you provide on the registration form to:
- set up your AIL account, and
- send you the payment forms.
Approved issuer status begins from the date we receive a fully complete application.
We have 20 working days from the date we receive the fully completed application to decline it, otherwise approval is automatically granted.
Zero-rating of NRWT on interest
Before any interest payments can have a zero rate of NRWT, all the following conditions must be met:
- We must have approved you as an approved issuer.
- You must have registered all the securities on which the zero rate of NRWT is to apply with us. Use an Application to register security or securities for approved issuer levy (AIL) (IR397) form to do this, or complete page two of the Approved issuer levy (AIL) - payer election (IR396) form.
- You can't be associated to the non-resident lender. Find out more about associated persons.
- The non-resident lender and you must agree that AIL applies. We recommend that an agreement in writing is made stating that AIL applies.
- From the amount of interest paid to the non-resident lender an additional 2% AIL must be paid to us by the due date. If you make a payment after the due date, please include any interest and late payment penalties.
Interest payments that do not satisfy the conditions for zero-rating are subject to NRWT.
Non-residents who have a fixed establishment in New Zealand are not liable for NRWT so zero-rating does not apply. You should deduct resident withholding tax from interest paid to these recipients.
Zero-rating of AIL on qualifying bonds
Where a bond issue meets a qualifying criteria instead of paying AIL at 2%, a zero rate can apply.
Agreements in writing
There is no set format that you must follow in giving written notices of interest paid to non-resident lenders under the AIL rules. However, we suggest the notice should show:
- that the interest is not taxable in New Zealand
- that NRWT has not been deducted from the interest
- the cost of any AIL to be recovered from the non-resident lender, shown as a fee or charge.
AIL is a charge in addition to the interest.
If you're entitled to claim a tax deduction for the cost of the amount borrowed, the AIL payment can also be claimed.
Paying AIL instead of deducting NRWT
A decision to pay AIL instead of NRWT cannot be retrospective. There may be occasions when you pay AIL on some interest, when you should have deducted NRWT. If this happens, you need to let us know as you will have under-deducted tax. This is because AIL is generally paid on interest at a rate of 2% but the NRWT rates are higher than the AIL rate. If this applies to you write to our non-resident centre with the following information
- how the underpayment happened
- which period it relates to
- how much NRWT you should have paid.
We'll transfer the payment to your NRWT account, and you'll have to make an extra payment to cover the shortfall. You may also be liable for a late payment penalty and possibly a shortfall penalty.
Late filing or payment
Where AIL is not paid on the due date, interest and late payment penalties will apply.
These are the same as the interest and late payment penalties that apply to late payment of income tax.
Where a return is filed late the zero rate for interest on certain bonds is not available. The full 2% levy rate is payable by the due date for that period.
If you know you will not be able to file the return in time please contact us to discuss.
Completing your end-of-year tax return
The overseas interest you have paid is tax deductible if it was incurred in earning assessable income or in running a business. If so you can claim a deduction in your New Zealand income tax return for the 2% AIL you have paid.