Taking The Mystery Out Of RWT Exemptions
for Non-profit Charitable Organisations
As a customer-owned New Zealand community bank, the team at SBS Bank takes great pride and pleasure in supporting the many non-profit charity organisations that help to build the foundations of our communities.
That is why we know how important it is to get your charity’s banking requirements set up correctly. An exemption from Resident Withholding Tax (RWT) is an area that is often misunderstood.
It is likely that as a charitable organisation, your entity will be exempt from RWT. However, there is still a legal requirement for an application to be made to the Inland Revenue Department to request a Certificate of Exemption (COE) from having resident withholding tax deducted from interest received. To apply for a COE you need to complete an IR451 form which can be obtained from the IRD website.
A registered bank has legal obligations and is required to:
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Sight your charitable organisation’s original COE, or a photocopy or a fax copy;
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Take reasonable steps to confirm that the recipient is the person named in the certificate;
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Keep a record of the exemption or IRD number shown on the certificate and a copy of the certificate.
Most COE’s for charitable organisations are issued for an unlimited period and remain valid unless they are cancelled. These certificates do not show an expiry date.
For example, at SBS Bank when one of our team are shown a COE, we check to see if it has an expiry date and if it has been cancelled (cancelled certificates are regularly updated on the IRD website). If an organisation’s COE does not have an expiry date and it has not been cancelled, then SBS Bank will assume this will remain valid.
There is a requirement for a person or organisation, which has had an exemption certificate cancelled by the IRD, that they must give their RWT payer written notice of the cancellation within five working days of receiving the IRD notification.
So unless you or your organisation can provide its bank with a valid COE, the bank will be legally obliged to deduct RWT. Likewise, if RWT has been deducted and you hold a COE you should advise your bank immediately. Any RWT that has already been deducted can be refunded by the IRD by completing an IR454 form, which can be obtained from the IRD website.
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