Non-resident film renters' tax rules

2012 legislation replaces the non-resident film renters' tax rules with non-resident withholding tax. Applies to payments made on or after Nov 2012.

Sections CC 10, CV 17, DW 3, IA 8, OB 29, OP 27, RF 2, YA 1 "schedular income", YD 6, YD 7 and YD 8 of the Income Tax Act 2007

The non-resident film renters' tax rules have been replaced with non-resident withholding tax (NRWT).


Previously, 10% of the gross receipts derived by non-residents from renting films in New Zealand were treated as taxable income under the Income Tax Act 2007. A non-resident film renter was not allowed a deduction in relation to this income. Because the non-resident was invariably a company, this meant that non-resident film renters were subject to an effective tax rate of 2.8% on their gross receipts (28% x 10%).

When income was subject to this rule, the income was not included in the income of the non-resident film renter under any other provision in the Act. Importantly, this income was excluded from the definition of "non-resident passive income" and therefore not subject to NRWT.

The rules for taxing non-resident film renters have existed in various forms since 1928. They were originally introduced because of the difficulties in accurately determining the net profit derived by non-residents from renting films in New Zealand.

The rules are an historical anachronism. The non-resident film renters' tax was not replaced in 1964 when NRWT was introduced because of the 1948 double tax agreement between the United States and New Zealand. That agreement prevented New Zealand taxing the income of United States' film renters except to the extent allowed under the previous rules. The 1982 agreement between New Zealand and the United States (which replaced the 1948 agreement) and the current agreement (in force from November 2010) contain no similar restriction on New Zealand's ability to tax income derived from New Zealand by United States-resident film renters.

Key features

The non-resident film renters' tax rules have been repealed as there is no longer a sound policy rationale for having separate tax rules for non-resident film renters.

This means that NRWT applies to amounts derived by non-residents from renting films in New Zealand. Practically all amounts that were subject to the non-resident film renters' tax comes within the "royalty" definitions in the Act and in double tax agreements. Only some minor types of receipts such as receipts from the sale or hire of film containers, which were subject to the previous rules, will not be subject to NRWT (because they are outside the "royalty" definition).

NRWT at variable rates will apply in accordance with double tax agreements between New Zealand and other countries, which limit the amount of NRWT that New Zealand can charge on royalties. The agreement royalty rate is generally 10%. However, the rate under the United States and Australian agreements is currently 5%, which will apply to many non-resident film renters. The NRWT rate of 15% applies if there is no applicable double tax agreement.

Persons who make payments to non-resident film renters for renting films in New Zealand will need to deduct and return NRWT from these payments.

Application date

This amendment applies to payments made on or after 2 November 2012.