Non-resident withholding tax on UK rental?

Our Experts Answer:

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.