RWT on PIE and Interest to be Changed
The Resident Withholding Tax rates on portfolio investment entities and interest are to be changed and aligned with personal rates and the 30% company tax rate.
Revenue Minister Peter Dunne announced on the 7th of July that as part of an upcoming taxation bill. There is no set date for the bill, as of yet, beyond later this month, although it is expected that it will pass in December. The announcement was made now so that financial institutions and banks have plentiful time to make required changes to implement the new bill.
The Resident Withholding Tax (RWT) on interest is calculated via the marginal tax rate of the recipient. As the marginal tax rates have changed, the RWT should also. These changes were meant to have occurred with the tax change, but there was not enough time for proper industry consultation. From the 1st of April 2010 and onwards, the WRT rates will be 12.5%, 21%, 33% and 38% . For those who do not specify their taxation rate the default rate will rise form 19.5%to 38%.
Portfolio Investment Entities (PIE) will also change on that same date. Rates will rise from 12.5% to 30%. Companies who invest in financial institutions will also see a 30% WRT rate on interest. This will become a mandatory system from the 1st of April 2010, but will be optional beforehand.
More technical details on these changes can be seen on the Inland Revenue Department’s technical annex, here.