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 resident withholding tax from your interest or dividend payment before they pay you.
How much tax do I pay?
The amount of resident withholding tax 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 resident withholding tax rate that the recipient chooses, depending on their income
- dividends and unit trust distributions are all taxed at a resident withholding tax 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.
At the end of the tax year, your income will be squared up to see if you've paid the right amount of tax.