Business loan other than a bank or normal lending institution

Business loan interest paid on money lent is known as resident withholding income and in certain circumstances must have resident withholding tax deducted (RWT).

If you pay more than $5,000 in business related interest per year to a financier other than a bank or normal lending institution, (for example a family member or friend), you will be required to register with the Inland Revenue Department as a RWT payer. You will then have to deduct RWT from the interest payments and forward it to the Inland Revenue on a regular basis.

RWT is deducted at different rates for different entities.

If the RWT deducted is $500 or more each month, the deductions must be paid by the 20th of the following month to the Inland Revenue Department

If the RWT deducted is less than $500 per month, each time the deductions accumulate to $500, the deductions must be paid in by the 20th of the month after the month the deductions have reach $500. Once the RWT deductions have been paid to the Inland Revenue Department, the $500 accumulation threshold recommences.

As the rules are complex, if you have any queries whatsoever, don’t hesitate to contact your wellington accountant.

 

 

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