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If you deduct and pay non-resident withholding tax (NRWT) then you'll need to use the right rate.

NRWT rates are decided by double tax agreements (DTAs). You'll need to deduct NRWT at the rate that applies to the area you're sending passive income to.

Using the right rate in double tax agreements (DTA)

A double tax agreement can hold a lower rate that payees may be eligible to use in the future. You cannot use this lower rate until then. Only use the rate that they're eligible for now. 

For example, a dividend needs paying to an Australian payee. The Double Tax Agreement shows different rates. The rate you use depends on how many shares the payee owns and how long they've held them for. 

If your payee thinks they've paid too much NRWT they can ask for a refund. They'll need to pass the eligibility test.

Set up a non-resident withholding tax refund

NRWT for dividends paid to companies: Administering the new holding period tests in Article 10 of the NZ/Australia DTA (and in agreements with other countries)

Areas without double tax agreements

You'll need to use higher deduction rates if you:

  • send passive income to a person travelling
  • send passive income to an area that does not have a double tax agreement with New Zealand
  • do not know the area you are sending passive income.

The rates for these areas are:

  • 15% for interest and royalties
  • 30% for dividends.