{"id":1373,"date":"2020-12-16T02:22:50","date_gmt":"2020-12-16T02:22:50","guid":{"rendered":"http:\/\/nz.legalvision.com.au\/?p=1373"},"modified":"2026-03-11T17:12:31","modified_gmt":"2026-03-11T04:12:31","slug":"withholding-tax","status":"publish","type":"post","link":"https:\/\/legalvision.co.nz\/corporations\/withholding-tax\/","title":{"rendered":"What is Withholding Tax in New Zealand?"},"content":{"rendered":"<p>New Zealand has a withholding tax system. This means that instead of a person who receives income paying their tax liability to Inland Revenue (IR) in a lump sum at the end of the tax year, their payer withholds a portion of the payment and pays it to IR on their behalf. This happens most commonly in the context of employers paying their employees\u2019 salary or wages. However, it also occurs with other types of payments, such as:\u00a0<\/p>\n<ul>\n<li>dividends;<\/li>\n<li>regular payments from a business to a contractor; or\u00a0<\/li>\n<li>a bank making interest payments to an accountholder.\u00a0<\/li>\n<\/ul>\n<p>This article helps business owners understand the different scenarios in which they may need to:<\/p>\n<ul>\n<li>withhold tax from payments; or<\/li>\n<li>have tax withheld from payments to them.<\/li>\n<\/ul>\n    <div class=\"my-7 lg:my-10 border-y-2 border-gray-100 py-7 lg:py-10 flex flex-col sm:flex-row items-start gap-10\">\n                    <img decoding=\"async\" class=\"w-52 mx-auto my-0! rounded\" src=\"https:\/\/img.legalvision.com.au\/wp-content\/uploads\/sites\/2\/2021\/10\/21140438\/NZ-Startup-Manual-251x360-2.png\" alt=\"Front page of publication\"\n                 loading=\"lazy\" width=\"208\" height=\"298\">\n                <section>\n            <div class=\"text-2xl font-bold\">NZ Startup Manual: A Legal Handbook For Founders<\/div>\n            <div class=\"body-text\">\n                <p>Essential reading for anyone building their startup. This free guide includes practical advice and seven real-life case studies.<\/p>\n            <\/div>\n            \n\n<a href=\"https:\/\/go.legalvision.co.nz\/NZ-Startup-Manual.html\" class=\" block px-5 py-3.5 max-w-fit bg-orange button__hover transition rounded text-white font-bold text-lg no-underline uppercase leading-tight text-center\" target=\"\" rel=\"\">Download Now<\/a>        <\/section>\n    <\/div>\n\n<h2>Pay as You Earn (PAYE)<\/h2>\n<p>Every time you pay your staff their salary or wages, you may need to withhold a certain percentage of the payment for their:\u00a0<\/p>\n<ul>\n<li>income tax liability;<\/li>\n<li>KiwiSaver contributions;<\/li>\n<li>student loan repayments;<\/li>\n<li>ESCT; and<\/li>\n<li>child support payments.\u00a0<\/li>\n<\/ul>\n<p>The amount you withhold is based on their tax code and income.<\/p>\n<p>Your employees will provide you with this information by completing a tax code declaration (IR330) when commencing their employment. If you do not receive a completed IR330, you must withhold 45% of their payment. Alternatively, you can figure out how much\u00a0<a href=\"https:\/\/legalvision.co.nz\/employment\/what-is-paye-in-new-zealand\/\">PAYE<\/a>\u00a0to withhold from each pay check by using\u00a0IR\u2019s calculator\u00a0if you know your employee\u2019s:<\/p>\n<ul>\n<li>superannuation fund;<\/li>\n<li>contribution rate; and<\/li>\n<li>ESCT rate.<\/li>\n<\/ul>\n<h2>Schedular Payments to Contractors<\/h2>\n<p>If your business makes regular payments\u00a0<a href=\"https:\/\/legalvision.co.nz\/employment\/consider-hiring-contractor\/\">to a contractor<\/a>\u00a0who provides services (e.g. an IT contractor), you also need to deduct tax from these payments. A contractor must provide you with a tax rate notification for contractors form (<a href=\"https:\/\/www.classic.ird.govt.nz\/resources\/9\/c\/9c019ad0-9071-4f3d-babb-7aa37e954bb4\/ir330c-2019.pdf\">IR330C<\/a>), which will inform you of their tax rate. If they do not provide you with an IR330C, you must deduct 45% from their payment for tax (or 20% if the contractor is a non-resident company).<\/p>\n\n<a href=\"#content-next\"\n   class=\"block p-4 mt-10 text-xl font-bold text-center text-white no-underline bg-gray-800 rounded-t-xl\">\n    Continue reading this article below the form\n    <i class=\"text-xl fa-regular fa-arrow-down\"><\/i>\n<\/a>\n<div class=\"px-6 pt-10 pb-12 mb-10 text-center bg-gray-100 rounded-b-xl sm:px-12 test\">\n    <div class=\"mb-8 text-2xl font-bold text-orange\">\n        Need legal advice?\n        <br>\n        <span class=\"text-lg not-prose\">\n                            Call <a href=\"tel:+64800005570\" class=\"not-prose\">0800 005 570<\/a> for urgent assistance.\n                <br>\n                Otherwise, complete this form, and we will contact you within one business day.\n                    <\/span>\n    <\/div>\n\n    \n\n<div class=\"not-prose flex justify-center text-left 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Like with employers paying wages, the bank, fund manager or custodian responsible for paying the interest or dividend withholds part of the payment and passes it onto IR on the payee\u2019s behalf.\u00a0<\/p>\n<p>The RWT rate on interest payments for individuals is that person\u2019s income tax rate (i.e. 10.5%, 17.5%, 30% or 33%). For companies, it is 28%. The RWT rate on dividends is 33% and is calculated as follows:<\/p>\n<div class=\"box box--icon box--info\">\n<p><i>33% x (dividend + tax paid or franking credit attached) \u2013 tax paid or franking credit attached.<\/i><\/p>\n<\/div>\n<p>Regardless of whether you are receiving interest or dividend income, you will need to provide the payer your IRD number. For interest payments, you will also need to elect your RWT rate (based on your income tax rate) by providing the payer with a \u2018Choose your RWT deduction rate\u2019 form (<a href=\"https:\/\/www.ird.govt.nz\/-\/media\/project\/ir\/home\/documents\/forms-and-guides\/ir400---ir499\/ir456\/ir456-2020.pdf\">IR456<\/a>). It is important that you provide your IRD number because otherwise, the payer must deduct 45% from your interest payments.<\/p>\n<h2>Non-Resident Withholding Tax<\/h2>\n<p>Non-resident withholding tax is similar to withholding tax but is tax that has been withheld from New Zealand payments to non-residents. These payments are called non-resident passive income. Foreign investors who get this type of income will have their tax paid by their payer. You must register as a non-resident withholding tax payer.<\/p>\n<h3>Exemptions<\/h3>\n<p>Some people may be exempt from paying non-resident withholding tax on their non-resident passive income. These exemptions apply when<\/p>\n<ul>\n<li>income is exempt from tax, including NRWT, under New Zealand tax law;<\/li>\n<li>income is exempt from tax because of any other New Zealand legislation; or<\/li>\n<li>double tax agreements allow for an exemption from tax on certain types of income.<\/li>\n<\/ul>\n<p>To request an exemption you can write a letter to the IRD requesting an exemption. The IRD will then send you a letter back approving your exemption if you meet the criteria.\u00a0<\/p>\n<h2>Key Takeaways<\/h2>\n<p>Instead of a person who receives income paying their tax liability to Inland Revenue (IR) in one lump sum, their payer withholds a portion of the payment and pays it to IR on their behalf throughout the year. Typically, the payer will be the person\u2019s employer. Working out the amount you must withhold from your employees\u2019 pay checks can be difficult.<\/p>\n<p>If you need help with withholding tax, our experienced <a href=\"https:\/\/legalvision.co.nz\/startup-lawyers-lp\">startup lawyers<\/a> can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on <a href=\"tel:+64800005570\" class=\"AVANSERnumber dynamic-number\">0800 005 570<\/a> or visit our <a href=\"https:\/\/legalvision.co.nz\/membership\/\">membership page<\/a>.<\/p>\n<h2>Frequently Asked Questions<\/h2>\n\n\n<div class=\"schema-faq wp-block-yoast-faq-block\"><div class=\"schema-faq-section\" id=\"faq-question-1677213645678\"><strong class=\"schema-faq-question\"><strong>What is withholding tax?<\/strong><\/strong> <p class=\"schema-faq-answer\">As an employer, you withhold a certain percentage of your employees\u2019 salaries each pay check, based on their individual income tax rate. It is very important to apply the correct tax rate. You pay this sum to Inland Revenue (IR) on their behalf.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1677213663015\"><strong class=\"schema-faq-question\"><strong>What is Pay as You Earn (PAYE)?<\/strong><\/strong> <p class=\"schema-faq-answer\">Pay as You Earn (PAYE) is another name for withholding tax.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1677213684540\"><strong class=\"schema-faq-question\"><strong>What is Resident Withholding Tax (RWT)?<\/strong><\/strong> <p class=\"schema-faq-answer\">You pay tax on interest you earn from bank accounts and dividends you earn from shares and other investments. The bank, fund manager or custodian responsible for paying the interest or dividend withholds part of the payment and passes it onto IR on your behalf.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1677213711591\"><strong class=\"schema-faq-question\"><strong>How do I calculate Resident Withholding Tax (RWT)?<\/strong><\/strong> <p class=\"schema-faq-answer\">The RWT rate on interest payments for individuals is that person\u2019s income tax rate (i.e. 10.5%, 17.5%, 30% or 33%). For companies, it is 28%. The RWT rate on dividends is 33% and is calculated as follows: 33% x (dividend + tax paid or franking credit attached) \u2013 tax paid or franking credit attached.<\/p> <\/div> <\/div>\n<div class=\"not-prose m-feedback-prompt\">\n    <!-- Thumbs up\/down bar -->\n    <div class=\"m-feedback-prompt__main\">\n        <div class=\"m-feedback-prompt__title\">Was this article helpful?<\/div>\n        <div>\n            <!--span class=\"m-feedback-prompt__button--text\">Thanks!<\/span-->\n            <button type=\"button\" class=\"m-feedback-prompt__button m-feedback-prompt__button--yes\"\n                    data-analytics-link=\"feedback-prompt:yes\" aria-label=\"Agree\">\n                <i class=\"fa-regular fa-thumbs-up fa-3x\"><\/i>\n            <\/button>\n            <button type=\"button\" class=\"m-feedback-prompt__button m-feedback-prompt__button--no\"\n                    data-analytics-link=\"feedback-prompt:no\" aria-label=\"Disagree\">\n                <i class=\"fa-regular fa-thumbs-down fa-3x\"><\/i>\n            <\/button>\n        <\/div>\n    <\/div>\n\n    <!-- Feedback form -->\n    <div class=\"m-feedback-prompt__form\">\n        <div class=\"m-feedback-prompt__form--thanks \">\n            <div>Thanks!<\/div>\n            <p>\n                We appreciate your feedback \u2013 your submission has been successfully received.            <\/p>\n        <\/div>\n        <form id=\"contact-form\" class=\"m-feedback-prompt__form--form\" action=\"\" method=\"post\">\n            <input type=\"hidden\" id=\"authenticity_token\" name=\"authenticity_token\" value=\"d2c2fab9ad\" \/><input type=\"hidden\" name=\"_wp_http_referer\" value=\"\/api\/wp\/v2\/posts\/1373\" \/>            <input value=\"https:\/\/legalvision.co.nz\/corporations\/withholding-tax\/\" type=\"hidden\" name=\"currenturl\"\n                   id=\"currenturl\">\n            <input value=\"What is Withholding Tax in New Zealand?\" type=\"hidden\" name=\"currenttitle\"\n                   id=\"currenttitle\">\n            <label>\n                <!-- display on thumbs-up -->\n                <span class=\"m-feedback-prompt__feedback m-feedback-prompt__feedback--yes\">\n                    Can you tell us <span class=\"font-semibold\">why<\/span> you found it helpful?\n                <\/span>\n\n                <!-- display on thumbs-down -->\n                <span class=\"m-feedback-prompt__feedback m-feedback-prompt__feedback--no text-lg\">\n                    How can we better improve this article?\n                <\/span>\n                <textarea name=\"feedbackmessage\" id=\"feedbackmessage\" required><\/textarea>\n            <\/label>\n\n            <div class=\"m-feedback-prompt__form--error\" id=\"form-submit-error\"><\/div>\n            <button id=\"submit-contact-form-button\" type=\"submit\" name=\"commit\" class=\"m-feedback-prompt__form--submit\"\n                    data-analytics-link=\"feedback-prompt:submit\">\n                Submit            <\/button>\n        <\/form>\n    <\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>New Zealand has a withholding tax system. This means that instead of a person who receives income paying their tax liability to Inland Revenue (IR) in a lump sum at the end of the tax year, their payer withholds a portion of the payment and pays it to IR on their behalf. This happens most<a href=\"https:\/\/legalvision.co.nz\/corporations\/withholding-tax\/\">Continue reading <span class=\"sr-only\">&#8220;What is Withholding Tax in New Zealand?&#8221;<\/span><\/a><\/p>\n","protected":false},"author":13248,"featured_media":935,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_relevanssi_hide_post":"","_relevanssi_hide_content":"","_relevanssi_pin_for_all":"","_relevanssi_pin_keywords":"","_relevanssi_unpin_keywords":"","_relevanssi_related_keywords":"","_relevanssi_related_include_ids":"","_relevanssi_related_exclude_ids":"","_relevanssi_related_no_append":"","_relevanssi_related_not_related":"","_relevanssi_related_posts":"1639,219316,219097,1364,1205,219360","_relevanssi_noindex_reason":"","editor_notices":[],"footnotes":""},"categories":[14],"tags":[24,25,54,187,188,190],"class_list":["post-1373","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-corporations","tag-startup","tag-small-business","tag-medium-business","tag-income-tax","tag-tax-obligations","tag-withholding-tax"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.1.1 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>What is Withholding Tax? 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Dillon is currently studying a Bachelor of Laws and Bachelor of Commerce majoring in Finance at Victoria University of Wellington. In his spare time, Dillon enjoys watching sports and keeping up with geo-politics.","sameAs":["laini.bennett@legalvision.com.au"],"url":"https:\/\/legalvision.co.nz\/author\/dillonbalasingham\/"},{"@type":"Question","@id":"https:\/\/legalvision.co.nz\/corporations\/withholding-tax\/#faq-question-1677213645678","name":"What is withholding tax?","acceptedAnswer":{"@type":"Answer","text":"As an employer, you withhold a certain percentage of your employees\u2019 salaries each pay check, based on their individual income tax rate. It is very important to apply the correct tax rate. You pay this sum to Inland Revenue (IR) on their behalf.","inLanguage":"en-NZ"},"inLanguage":"en-NZ"},{"@type":"Question","@id":"https:\/\/legalvision.co.nz\/corporations\/withholding-tax\/#faq-question-1677213663015","name":"What is Pay as You Earn (PAYE)?","acceptedAnswer":{"@type":"Answer","text":"Pay as You Earn (PAYE) is another name for withholding tax.","inLanguage":"en-NZ"},"inLanguage":"en-NZ"},{"@type":"Question","@id":"https:\/\/legalvision.co.nz\/corporations\/withholding-tax\/#faq-question-1677213684540","name":"What is Resident Withholding Tax (RWT)?","acceptedAnswer":{"@type":"Answer","text":"You pay tax on interest you earn from bank accounts and dividends you earn from shares and other investments. The bank, fund manager or custodian responsible for paying the interest or dividend withholds part of the payment and passes it onto IR on your behalf.","inLanguage":"en-NZ"},"inLanguage":"en-NZ"},{"@type":"Question","@id":"https:\/\/legalvision.co.nz\/corporations\/withholding-tax\/#faq-question-1677213711591","name":"How do I calculate Resident Withholding Tax (RWT)?","acceptedAnswer":{"@type":"Answer","text":"The RWT rate on interest payments for individuals is that person\u2019s income tax rate (i.e. 10.5%, 17.5%, 30% or 33%). For companies, it is 28%. The RWT rate on dividends is 33% and is calculated as follows: 33% x (dividend + tax paid or franking credit attached) \u2013 tax paid or franking credit attached.","inLanguage":"en-NZ"},"inLanguage":"en-NZ"}]}},"_links":{"self":[{"href":"https:\/\/legalvision.co.nz\/api\/wp\/v2\/posts\/1373","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/legalvision.co.nz\/api\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/legalvision.co.nz\/api\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/legalvision.co.nz\/api\/wp\/v2\/users\/13248"}],"replies":[{"embeddable":true,"href":"https:\/\/legalvision.co.nz\/api\/wp\/v2\/comments?post=1373"}],"version-history":[{"count":12,"href":"https:\/\/legalvision.co.nz\/api\/wp\/v2\/posts\/1373\/revisions"}],"predecessor-version":[{"id":230151,"href":"https:\/\/legalvision.co.nz\/api\/wp\/v2\/posts\/1373\/revisions\/230151"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/legalvision.co.nz\/api\/wp\/v2\/media\/935"}],"wp:attachment":[{"href":"https:\/\/legalvision.co.nz\/api\/wp\/v2\/media?parent=1373"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/legalvision.co.nz\/api\/wp\/v2\/categories?post=1373"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/legalvision.co.nz\/api\/wp\/v2\/tags?post=1373"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}