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|Approved issuer||Non-resident passive income|
|Approved issuer levy (AIL)||NRWT (non-resident withholding tax)|
|Associated persons||Redemption payment|
|Bonds (qualifying)||Registered security|
|Interest||Variable principal debt instrument|
|Leviable value||Zero rating (AIL)|
A borrower who has elected to be an approved issuer and has registered as an approved issuer with us. This allows you or a person on your behalf, to pay interest to a non-resident without having to deduct non-resident withholding tax.
A payment calculated at the rate of 2% of the leviable value of the registered security. This is the amount of interest paid for the security, or any redemption payment on a bond issued at a discount.
The following are associated persons:
To work this out draw a family tree. Each link between names is a degree of relationship. Count backward from one person to a common ancestor, then forward to the other person. A first cousin or a great-aunt are examples of relatives to the fourth degree.
Separate associated person rules apply where a bank or other businesses operating in the financial sector, similar to a bank, borrows from an associated person.
The associated persons rules have recently been amended and have the following application dates:
Transactions involving land
Transactions other than land
The changes to the other provisions apply to transactions occurring in 2010-11 and later income years.
You can find out more about the amended rules in Tax Information Bulletin Vol 21 No 8, October/November 2009, Part II New legislation.
Where a bond issue meets certain requirements instead of paying AIL at 2%, a zero rate applies.
Criteria for qualifying
To qualify for the zero rate on interest payments the security must:
Widely held test
To meet the widely held test a security must:
A place of business from which a substantial business is carried out, such as a retail shop, hotel, factory or farm. A property let for rent is generally seen as an investment rather than a business.
Any amount paid or credited for money lent. This covers redemption payments.
Interest, dividends and royalties which a non-resident has received or is considered to have received from New Zealand.
A tax deducted from non-resident passive income. Anyone who pays non-resident passive income must deduct NRWT and pay it to us each month. The rate of NRWT to deduct depends on the type of income and where the recipient is resident.
The additional amount paid on the commercial bill when the total amount paid is more than the amount originally borrowed.
Any transaction involving money lent to an approved issuer that is:
A person is a tax resident if they:
A person who has been a New Zealand tax resident will become a non-resident if they:
A company is a resident in New Zealand if:
|The rules for tax residency are not the same as citizenship or usual residency criteria. You can find out more abuot enduring relationship and tax residency our booklet New Zealand tax residence (IR292).|
A financial arrangement where one party can ask the other party:
Where a bond issue meets the qualifying criteria, instead of paying AIL at 2%, a zero rate can apply.