New Zealand: Reopening of quick and standard refunds for bonds under the Approved Issuer Levy regime
Reference
Clearstream1 informs clients that effective
immediately
Quick and Standard refunds are available for New Zealand bonds under the Approved Issuer Regime on a case by case, “best-efforts “basis, subject to Inland Revenue Department approval.
Background
In August 2023 (see Announcement A23070), Clearstream suspended Quick Refund (QR) and Standard Refund (SR) services for the Approved Issuer Levy (AIL) regime following confirmation from our local depository and the Inland Revenue Department (IRD) that there was no mechanism for retrospective AIL applications. Consequently, investors who had not elected for the AIL regime prior to an interest payment were subject to the default Non-Resident Withholding Tax (NRWT) of 15%.
Recently, New Zealand tax law was amended to permit retrospective AIL registration. A retrospective application to the AIL regime is now possible within two years of the first interest payment.
This regulatory change enables Clearstream to reinstate the QR and SR services for New Zealand bonds under the AIL regime.
Impact on clients
Quick and standard refund services are now available for New Zealand bonds under the AIL regime, enabled by the new possibility to apply for AIL regime retroactively. However, this is on a case-by-case, "best-efforts" service, subject to IRD approval.
Eligibility
The service is available for situations where the default NRWT rate of 15% was applied because an AIL election was not made on time.
As the IRD does not automate refunds for this overpayment, the investor initially bears the cost difference between the NRWT and AIL rates. Upon receiving a QR or SR request, Clearstream will investigate the following details with its local depository:
- Availability of the request for the event.
- Certification requirements for the beneficial owner.
If successful, clients may obtain a refund of the tax withheld, reducing the rate from as high as 15% to the applicable AIL rate. The AIL rate is either 0% for registered government or qualifying corporate debt securities, or 2% for other registered corporate debt securities.
Procedure
The process required to apply for a reclaim (that is, QR or SR) via Clearstream under the AIL regime is identical to the existing one for NRWT Quick and Standard refunds. The documentation requirements and submission deadlines are the same: To facilitate this, the “Letter of Request to Clearstream for Reclaim of Withholding Tax on New Zealand securities” has been updated to include the AIL status as a legal basis for the claim.
Important note: Clearstream’s local depository or the IRD may request additional documentation on a case-by-case basis. Any such documentation requirements will be communicated to clients.
DISCLAIMER: These quick refund and standard refund services are provided on a "best-effort" and case-by-case basis. While Clearstream will facilitate the submission process, we provide no guarantee regarding the outcome. The final decision for approval rests solely with the Inland Revenue Department (IRD). Accordingly, Clearstream assumes no liability for the success or failure of any claim.
Further information
Clients may contact the Tax Help Desk, Clearstream Client Services or their Relationship Officer.
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1. Clearstream refers collectively to Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Trade and Companies Register under number B-9248, and Clearstream Europe AG, registered office at Mergenthalerallee 61, 65760 Eschborn, Germany and registered in Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500. Clearstream Banking S.A. is registered as an Australian CS (Overseas) Facility, under subsection 824B(2) of the Corporations Act 2001, with registration number ARBN 675 244 783.