Banks and institutions well set for RWT rates drop

Work being done by banks and other financial institutions in readying their systems for the 1 October drop in resident withholding tax (RWT) rates has been commended by Revenue Minister Peter Dunne.

Along with personal tax cuts coming into effect on the same day, people have a reduction in withholding tax charged on their interest. RWT rates will be aligned with the new personal income tax rates.

RWT on interest earned is currently charged at the rate of 12.5%, 21%, 33% or 38%.

As part of Budget 2010, the rates will drop on 1 October to correspond with the new lower tax rates: 10.5%, 17.5%, 30% and 33%.

The company RWT rate will be 28% from 1 April 2011, the date the company tax rate decreases, while the RWT rate on interest paid to trusts will remain unchanged at 33%

"Banks will be taking care of moving people over to the new rates automatically, so their customers do not need to do anything" Dunne said.

The new rates will apply to interest actually paid on or after 1 October 2010 regardless of what period it was earned over.

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