You pay tax on interest and dividends you earn from bank accounts and investments you have in New Zealand. You also pay tax on income from overseas accounts and investments. This is resident withholding tax (RWT).
Your payer (bank or fund manager), or sometimes a custodian, deducts RWT from your interest or dividend payment before they pay you.
How much tax do I pay?
The amount of RWT your payer deducts depends on your tax status, the type of interest or dividends you earn, and the information you give your payer. For example:
- interest payments from a savings account or term deposit to an individual are taxed at a RWT rate that the recipient elects, depending on their income
- dividends and unit trust distributions are all taxed at a RWT rate of 33%, while portfolio investment entities (PIEs) are taxed at different rates depending on the type of fund
- interest payments to a company are taxed at the maximum rate if you have not given your IRD number to the interest payer.
When your tax position is calculated at year-end, an end-of-year square up will make sure that you have paid the right amount of tax.