Withholding tax payments accelerated on related party loans with retrospective effect (27 April 2017) (New Zealand)

Bell Gully

A recent law change targeting related party loans will accelerate the payment of non-resident withholding tax (NRWT) for some New Zealand borrowers. Significantly, the new rules will have retrospective effect for some existing related party loans.

The changes will impact cross-border "related party debts" which give the New Zealand borrower tax deductions for accruing interest, but which provide for payment of the interest in cash – and therefore payment of NRWT – on a deferred basis. For this purpose, related party debt include loans between associates (e.g. parent and New Zealand subsidiary), whether direct or indirect, and loans from non-resident people/entities acting together to a New Zealand borrower.

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