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Approved issuer levy: General information about AIL and approved issuer status
If you pay interest to a non-resident lender and want to pay it at the zero rate of non-resident withholding tax (NRWT), you need to obtain approved issuer status. This means you elect to become an approved issuer and meet various conditions.
- Zero-rating of NRWT on interest
- Approved issuer status
- Registering securities
- Zero-rating of AIL on qualifying bonds
- Agreements in writing
- Paying AIL instead of deducting NRWT
- Late filing or payment
- Completing your end-of-year tax return
Zero-rating of NRWT on interest
Before any interest payments can have a zero rate of NRWT, you must meet all the following conditions:
- You must have obtained approved issuer status.
- You must have registered all the securities a zero rate of NRWT will apply to.
- You can't be associated to the non-resident lender.
- The non-resident lender and you must agree that AIL applies. We recommend you have a written agreement stating AIL applies.
- You must:
- pay to us the 2% AIL (calculated on the amount of interest paid to the non-resident lender), and
- pay that amount by the due date.
Interest payments that aren't covered by the condiditons are subject to NRWT.
Zero-rating doesn't apply to non-residents with a fixed establishment in New Zealand. In these cases you deduct resident withholding tax (RWT) from interest paid.
Approved issuer status
To obtain approved issuer status, you need to:
- elect to be an approved issuer, you can do this in myIR by completing the Approved issuer levy (AIL) - payer registration (IR396) form, and
- have complied with your requirements under all Inland Revenue Acts during the two years before the date we receive the IR396.
Approved issuer status is automatic from the date we receive a complete IR396. We'll then set up your AIL account.
We'll respond to you within 20 working days from the date we receive your completed IR396 form.
Return and payment dues dates will depend on how much AIL you expect to pay each year.
You can do this:
- when you elect to be an approved issuer in myIR, or
- by completing an Application to register security or securities for approved issuer levy (AIL) (IR397) form.
Zero-rating of AIL on qualifying bonds
Where a bond issue meets a qualifying criteria a zero rate can apply.
Agreements in writing
There isn't a set format to follow but we suggest the agreement between you and the lender confirms the:
- interest is not taxable in New Zealand
- interest hasn't had NRWT deducted from it, and
- cost of any AIL if it is recovered from the non-resident lender is 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 if you paid it.
Paying AIL instead of deducting NRWT
AIL is generally paid on interest at a rate of 2% but NRWT rates are highter than the AIL rate.
Sometimes you may pay AIL on some interest when you should have deducted NRWT. If this happens, you'll have under-deducted tax and need to let us know.
You can't backdate a decision to pay AIL instead of deducting NRWT.
If you've under-deducted tax, write to our Non-Resident Centre with the following information
- how the underpayment happened
- which period it's in, and
- how much NRWT you should have paid.
We'll transfer the payment to your NRWT account. 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 by or before 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 isn't 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 contact us to talk about it.
Completing your end-of-year tax return
The overseas interest is tax-deductable if you paid it to:
- earn assessable income, or
- run a business.
In these cases you can claim a deduction in your New Zealand income tax return for the 2% AIL paid.