KEY POINTS:
Some withholding tax rates will be cut next year under a new tax treaty with the United States that was due to be signed in Washington last night.
For dividends the non-resident withholding tax is currently 15 per cent, although under New Zealand's complex foreign investor tax credit regime it is effectively zero so long as the dividend is fully imputed.
Under the revised double tax agreement the rate for portfolio investors, who own less than 10 per cent of a company in the other country, remains at 15 per cent. But for holdings from 10 to 80 per cent it drops to 5 per cent, and for holdings above 80 per cent it is zero.
This matches the US-Australian agreement.
For interest payments the current 10 per cent rate continues generally but it will be zero for interest received by a lending or finance business which is unrelated to the interest payer - provided that in the case of interest sourced in New Zealand the 2 per cent approved issuer levy is paid.
For royalties the NRWT drops from 10 per cent to 5 per cent.
Prime Minister John Key said the cost would be about $20 million a year.
