Resident Withholding Tax (RWT) is deducted from dividends and interest before you receive them, similar to how PAYE is deducted from wages. Understanding how RWT interacts with imputation credits helps you ensure you are not overpaying or underpaying tax on investment income.
RWT is deducted at 33% from dividends (or at your notified rate if lower). Imputation credits attached to dividends offset both RWT withheld and final tax owed. If total imputation credits exceed your tax liability on the dividend, you get a refund. Provide your IRD number and correct RWT rate to companies paying you dividends to ensure the right amount is withheld.
What Is Resident Withholding Tax (RWT)?
RWT is a withholding tax applied to certain types of New Zealand-sourced investment income paid to NZ residents:
- Interest — from banks, term deposits, corporate bonds
- Dividends — from NZ companies
It is not a separate tax — it is a prepayment of your income tax on that investment income. At year end, RWT withheld is credited against your total tax liability.
RWT on Dividends
The standard RWT rate on dividends is 33%, but it can be lower if:
- You have notified the company of your lower marginal rate
- Imputation credits are attached to the dividend (which reduce or eliminate the need for RWT)
The Interaction with Imputation Credits
Most dividends from NZ companies come with imputation credits — representing the 28% company tax already paid. These credits are applied before calculating RWT:
Standard calculation:
- Company declares a dividend
- Imputation credits are attached (up to 28/72 of the cash dividend for a fully imputed dividend)
- RWT is applied to the gross dividend minus imputation credits at the applicable rate
- You receive the net dividend (cash dividend minus RWT)
For a fully imputed dividend, no additional RWT is typically required because the 28% imputation credit covers most or all of the tax due. The company may withhold a top-up RWT if your marginal rate exceeds 28%.
RWT on Interest
For bank interest and term deposits, RWT is deducted at your notified rate (or 33% if you haven’t provided your rate):
| If you don’t provide your RWT rate | Default rate |
|---|---|
| No IRD number provided | 45% (non-declaration rate) |
| IRD number provided, no rate specified | 33% |
| Rate specified | Your chosen rate |
Available RWT rates for interest: 10.5%, 17.5%, 28%, 33%, 39%
Set your RWT rate to match your marginal tax rate. If you set it too low, you will owe more tax at year end. If too high, you receive a refund — but you have given IRD an interest-free loan in the meantime.
To set your RWT rate, contact each financial institution where you hold savings, term deposits, or bonds.
Providing Your IRD Number
If you do not provide your IRD number to a paying institution (bank or company), they must withhold at 45% — the non-declaration rate. Always provide your IRD number to avoid this.
How to Claim RWT Credits
RWT withheld is automatically reported to IRD by the payer. It should be pre-populated on your:
- Income tax assessment (if you are not an IR3 filer)
- IR3 (the interest/dividend section shows gross income and RWT credits)
If the pre-populated figure is incorrect, cross-reference against your bank statements and dividend statements from the share registry. Contact the payer if there is a discrepancy.
Imputation Credits: The Full Picture
Imputation credits arise because NZ has an imputation system to prevent double taxation of company income. When a company pays tax at 28%, it accumulates imputation credits in its “imputation credit account” (ICA). When it pays dividends, it attaches these credits proportionally.
Why this benefits investors:
- If your marginal rate is 33%, imputation credits of 28% mean you only pay an additional 5%
- If your marginal rate is 28%, imputation credits fully offset your tax — net tax owed is zero
- If your marginal rate is 17.5% or 10.5%, you receive a refund of the excess credits
You cannot receive a refund of imputation credits unless:
- The company has properly attached the credits to the dividend
- You are a NZ tax resident
- The credits are from NZ-resident company dividends
Frequently Asked Questions
What RWT rate should I use for my bank account?
Use your expected marginal tax rate. Most NZ workers earning between $14,000 and $48,000 should use 17.5%. Earners above $48,000 should use 30% or 33%. If in doubt, use 33% — you get any overpayment refunded.
I hold shares in a NZ company that paid a partially imputed dividend. How is that taxed?
A partially imputed dividend has some imputation credits (but not the maximum 28/72 ratio). Your tax is calculated on the gross dividend at your marginal rate, and you receive credit for the imputation credits attached. RWT may be deducted on the unimputed portion.
Does RWT apply to KiwiSaver or managed fund distributions?
No. KiwiSaver and PIE funds use the PIE regime — not RWT. Tax is handled within the fund at your PIR rate and is settled separately from the RWT system.
I received overseas dividends. Does RWT apply?
No — RWT applies only to NZ-sourced income from NZ-resident companies. Overseas dividends may have foreign withholding tax deducted, which may be creditable against your NZ tax under a double tax agreement. Declare overseas dividends as “other income” on your IR3.