The updated double tax agreement between New Zealand and the United States that was signed on 1 December 2008 has just come into force.

Among the main changes to the agreement are that withholding taxes on certain dividends, interest and royalty payments have been reduced.

The new rates are effective from 1 January 2011 and are:

  • Dividends: 5% if the holding company owns voting interests of at least 10%
  •  0% if the holding company owns voting interests of 80% or more of the shares and fulfils other requirements.
  • Interest:  10% in most cases; exception for lending or finance businesses in which case it is 0% provided 2% Approved Issuer Levy is paid.
  • Royalties: 5%.

The former rates were:

  • Interest and royalties 10%, dividends 15%.

I am currently doing a comparison of the changes and will be putting these into a newsletter as part of a refresher on what the treaty means.