QB 21/02
Issued
30 Apr 2021

Whether “negative interest” payments are subject to withholding taxes

This question we’ve been asked explains the application of the resident withholding tax (RWT) and non-resident withholding tax (NRWT) rules to situations where negative interest is charged on an advance of money or a loan. 

The Commissioner has been asked this question by banks and financial institutions because they wish to have appropriate processes in place should the RWT and NRWT rules apply to negative interest payments and they are required to withhold tax. 

Income Tax Act 1976
Income Tax Act 1994, s OB 1 (“interest”)
Income Tax Act 2007, subparts RE (s RE 2) and RF (s RF 2), s YA 1 (“interest”, “money lent”)
Income Tax Amendment Act 1983

Marac Life Assurance Ltd v CIR [1986] 1 NZLR 694 (CA)
Wilson & Horton v CIR (1995) 17 NZTC 12,325 (CA)