Non-resident withholding tax on UK rental?
Question from Alison updated on 12th October 2012:
We have an overseas mortgage on a rental property in the Untied Kingdom. I understand we need to apply for approved issuer status to be able to zero-rate non-resident withholding tax. Because the loan is a joint mortgage, do my husband and I have to apply separately to be approved issuers and complete double the paperwork on our respective shares of the loan?
Our expert Mark Withers responded:
You are correct that you need to register the foriegn debt for approved issuer levy which is a 2% full and final tax on the New Zealand dollar interest you pay on the foriegn debt. Once registered you are no longer subject to the 10% non-resident witholding tax (NRWT) that would otherwise apply. These rules exist because you are entitled to claim a deduction for the interest you pay on the foriegn debt if it is linked to earning income but at the same time New Zealand isn't taxing the profit the United Kingdom bank is making out of you. The NRWT is essentially a sharing of the tax take on the profit the United Kingdom bank is making from the loan. Probably the easiest administrative solution is to apply for a partnership IRD number and then register the partnership for approved issuer levy.
Mark Withers and his team at Withers Tsang & Co specialise in advising on property related transactions, valuation and restructure services and tax planning.