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Correcting errors when deducting RWT from interest and dividends

Ways to make the correction

If you haven't deducted enough RWT from a recipient's interest or dividends when you should have, or haven't deducted enough, there are two ways you can correct this. You can either:

  • deduct the shortfall from subsequent payments to that recipient in the same income year, and pay the extra amount to us with a letter of explanation, or
  • pay the amount of the shortfall yourself and then recover it from the recipient.

If you've deducted too much RWT in the current year

If the recipient is a resident

If you identify the error before 31 March, you can repay the excess deductions to the recipient if you:

  • haven't already given them a deduction certificate, or
  • have given them a deduction certificate, but get it back and cancel it, provided you haven't filed your annual IR15S reconciliation statement.

If the excess deduction has already been paid to us, you can do one of two things:

If you will ... then you ... and ...
be making future RWT deductions can offset the excess deduction against the recipient's future RWT deductions payable

send us a letter of explanation with your reduced payment so we don't charge you penalties. Let us know the period you over-deducted so we can transfer the credit to the period you under-deducted.

On your Resident withholding tax (IR15P) payment form, show the full RWT that should have been deducted in Box 3, but show the reduced payment in Box 4.

not be making future RWT deductions should advise the recipient to claim the over-deduction in their end-of-year return of income - see Note below if the recipient is a personal customer, they must contact us at the end of the income year to request a personal tax summary to claim the excess deduction.

 

Note

If the recipient:

  • is exempt from filing an end-of-year return, and
  • has a certificate of exemption

they should complete a Resident withholding tax - refund request (IR454) form. Fill in the payer's details on the IR454 and give the form to the recipient. They must then fill in the rest of the form and return it to us. We'll send the refund directly to the recipient.

If the recipient is a non-resident

Interest paid to non-residents is non-resident passive income, so it's not subject to RWT. Instead, you must deduct NRWT (Non-resident withholding tax).

If you deduct RWT and then find out that the recipient is a non-resident

In this case you'll need to correct the error.

If you find the error before you have filed your reconciliation

In this case you can simply deduct less NRWT from the next payment to that recipient, and reduce the following NRWT payment. If you do this, you'll need to send us a letter of explanation with your reduced payment, so we know not to charge you penalties, and tell us the period you over-deducted so we can transfer the credit to the period under-deducted. On your New Zealand NRWT withholding tax (IR67P) payment slip show the full NRWT that should have been deducted in Box 6, but show the reduced payment in Box 7.

If the recipient is no longer one of your investors

In this case you cannot alter a future payment. The recipient must apply for the refund using a New Zealand non-resident withholding tax- refund request (IR386) form.

If you've deducted too much RWT in previous years

If the recipient is a resident

If you find a mistake in a previous income year, the recipient can claim the excess deductions:

  • in their personal tax summary, or
  • in their end-of-year income tax return, or
  • by completing a Resident withholding tax - refund request (IR454) form if they hold a valid certificate of exemption.

Please don't issue amended certificates or file an amended reconciliation.

If the recipient is a non-resident

Interest paid to non-residents is non-resident passive income, so it's not subject to RWT. Instead, you must deduct non-resident withholding tax (NRWT). If you deduct RWT and then find out that the recipient is a non-resident, they can claim the excess deductions:

  • in their end-of-year tax return (if they have an IRD number), or
  • by completing a New Zealand non-resident withholding tax (NRWT) (IR386) refund application.

Please don't issue amended certificates or file an amended reconciliation

Completing the New Zealand non-resident withholding tax (NRWT) (IR386) refund application

In some cases you'll fill in all the details on the New Zealand non-resident withholding tax (NRWT) (IR386) form. In others the recipient will ask you to complete a form that they have started. Please fill in all the information requested, so we can arrange the refund. When we receive the New Zealand non-resident withholding tax (NRWT) (IR386) we arrange to refund the credit from the payer's RWT account, according to the instructions on the form.

If the recipient doesn't have a certificate of exemption

For current year over-deductions or back-year overpayments, if the recipient doesn't have a certificate of exemption, please write to us requesting a refund and explaining the error, and including the period in which it occurred.

We'll send you the excess deductions, which you must forward to the recipient.

If you have deducted too much RWT because of a recipient's mistake, you cannot refund the excess. You must pay us the full amount. The recipient can get the excess RWT refunded at the end of the income year. If the recipient is:

  • a personal customer, they must contact us and request a personal tax summary
  • required to file an end-of-year income tax return, for example an IR3, they must claim the over-deduction in that return.

 


Date published: 07 Jul 2011

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