Latest News [index] Cross border withholding tax issues
When interest is paid to an off-shore lender non-resident withholding tax (NRWT) or approved issuer levy (AIL) is usually payable in addition to the interest.
AIL (if an option), which is payable at the rate of 2% is generally preferable to NRWT at 10 or 15%. However, it is important to be clear that the lender is in fact offshore.
This may seem self-evident. However, as people become more global, it is not just the person's residence that changes, but also at times the residence of associated companies and trusts.
This was highlighted in a recent case where a Hong Kong resident company was found to have become a New Zealand resident for tax purposes for a number of years due to the residence of the company's "controllers". The significance of the finding was that instead of a question as to whether AIL was in fact available the enquiry became one of whether tax should have been paid at the resident withholding tax rate of 30%.
Where matters relating to residence are manipulated for tax purposes it also becomes necessary to consider any possible application of the tax avoidance provisions.
For more information or if you have any concerns about tax residence please contact a member of the Ayres Legal team. Also see Taxation Review Authority Case 11/2011 [2011]NZTRA 7