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What is Approved Issuer Levy

In an effort to streamline taxation processes and ensure a fair tax regime, New Zealand introduced the Approved Issuer Levy (AIL) system. The AIL is a tax measure designed specifically for non-resident investors who receive interest income from investments in New Zealand. This was introduced by New Zealand Government in Budget 1991, the AIL seeks to simplify tax obligations for non-resident investors while promoting transparency and compliance within the financial sector.

NRWT on interest income

Non-resident withholding tax (NRWT) is a tax withheld from New Zealand payments of interest, dividends, and royalties to non-residents and foreign investors. Non-resident lender can choose to pay NRWT on interest income they earned in New Zealand. For NRWT tax rate it is about 15%. If Non-resident lender is from a tax jurisdiction that has DTA (Double Tax Agreement) with New Zealand, the NRWT rate dropped to 10%.

OR, Approved Issuer levy (AIL) option can be selected, with 2% rate. While NRWT payment is available as a tax credit, 2% AIL is not a tax credit.

What is the Approved Issuer Levy (AIL)?

By offering a straightforward and tax friendly system, New Zealand seeks to attract foreign investors to its financial markets. The AIL provides investors with greater clarity on their tax obligations, instilling confidence in the investment landscape and encouraging cross-border investments. Under this scheme interest income of non-tax resident earned in New Zealand can be zero rated of NRWT provided a levy of additional 2% of interest income is paid.

Following conditions need to met for interest payments can have zero rate of NRWT:

  • You are not associated to the non-resident lender.
  • You must apply to be an approved issuer.
  • You must have registered with IRD all the securities on which the zero rate of NRWT is to apply.
  • The non-resident lender and you must agree that AIL applies. Best practise is to make this agreement be in writing.
  • From the amount of interest paid to the non-resident lender an additional 2% AIL must be paid to IRD by the due date.

Interest payments that do not satisfy the conditions for zero-rating are subject to NRWT

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