Hon Bill English
Minister of Finance
Hon Peter Dunne
Minister of Revenue
Protocol updates US-NZ double tax agreement
Finance Minister Bill English and Revenue Minister Peter Dunne have welcomed the signing in Washington today of a protocol that updates the double tax agreement between New Zealand and the United States.
The main feature of the updated agreement will be lower withholding taxes on dividend, interest and royalty payments between New Zealand and the United States.
"This is an important development that will benefit both countries by helping to reduce tax barriers to two-way trade and investment," Mr English and Mr Dunne said.
"Lower withholding tax rates will make it less costly for businesses in one country to invest in the other, and to bring their profits home for reinvestment or distribution to shareholders."
The withholding rate on dividends will reduce from 15% to a maximum of 5% for an investor who holds at least 10% of the shares in the company that pays the dividend, and to 0% if the investor holds 80% or more of the shares in the company and meets other criteria.
The withholding rate on royalties will reduce from 10% to 5%, and the definition of 'royalties' will be revised to exclude payments for leased equipment.
The rate on interest will generally remain at 10%, although it will drop to 0% for interest paid to lending or finance businesses, provided that the 2% Approved Issuer Levy is paid on New Zealand-sourced interest.
The updated double tax agreement will come into force once both parties have given legal effect to it, which in New Zealand's case will occur through an Order in Council.
The United States is New Zealand's second largest export market and third largest source of imports. It is second only to Australia as a source of foreign direct investment into New Zealand and as a direct investment destination for New Zealanders.
The text of the amending protocol to the United States-New Zealand double tax agreement is available at www.taxpolicy.ird.govt.nz.
Media contact: Bryan McDaniel, 021 228 0747