According to IRD requirement, the bank deducts Withholding Tax at the tax rate you declared. If you didn’t inform your bank of your tax rate, Your Withholding Tax will be deducted at the highest IRD tax rate.

Withholding Tax

Withholding tax is a tax deducted from the investment income such as interest you earn from the bank. The bank pays this tax to Inland Revenue (IRD) on your behalf. Withholding tax can be Resident Withholding Tax (RWT) or Non-Resident Withholding Tax (NRWT) depending on your New Zealand tax resident status. There is also Approved Issuer Levy (AIL) which may be paid as an alternative to NRWT.

The bank deducts Withholding Tax based on your declared rate. If you didn’t inform ICBC NZ of your IRD number or tax rate, ICBC NZ will deduct your tax at the non-declaration rate of 45% or the default rate of 33%.

Resident Withholding Tax (RWT) 

Resident Withholding Tax is the tax deducted on the investment income such as interest paid to New Zealand tax residents on their deposit accounts.Your resident withholding tax (RWT) rate is based on your taxable income and there are different rates for individuals, trusts, companies and partnerships. 

If you are a New Zealand tax resident and have provided your IRD number but not your tax rate to the bank, your RWT will be deducted at the default rate of 33%. 

From 1 April 2020, if you are a New Zealand tax resident and you did not provide the bank with your IRD number, your RWT will be deducted at the non-declaration rate of 45%. You can find the current information on RWT rates on the Inland Revenue (IRD) website (https://www.ird.govt.nz/).

Non-Resident Withholding Tax (NRWT) and Approved Issuer Levy (AIL)

Non-Resident Withholding Tax is the tax deducted on the investment income such as interest paid to non-New Zealand tax residents on their deposit accounts. The NRWT rate applicable to you is based on your country of residence as declared by you. The rate may be 10% or 15%, but it will be based on the tax treaty between New Zealand and your country of residence. More information on NRWT can be found on the Inland Revenue (IRD) website ( https://www.ird.govt.nz/).

Alternatively, if you are a non-New Zealand tax resident, you can elect the Approved Issuer Levy (AIL) at the rate of 2% applied to your investment income earned. AIL is a levy paid by non-New Zealand tax residents on their deposit accounts.  Find out more about AIL on the Inland Revenue (IRD) website (https://www.ird.govt.nz/).