IBBZ Accounting

Chartered Accountants & Tax Specialist


Useful tips for Small Business

General update by IBBZ Accounting on latest tax news, business growth and technology tips.

Blog posts tagged in RWT

Proposed Solutions to RWT for Small Businesses

RWT on dividends between companies

With amendments being made to sections RE 2(5), this now limits the definition of “resident passive income”. This section excludes fully imputed dividends paid to a corporate shareholder if the paying company chooses to exclude the dividend from the definition.

This will allow a company to opt out of withholding RWT on a fully imputed dividend paid to another company.

The above amendments were needed because of company tax rate being lowered from 33% to 28%. Dividends were effectively overtaxed by the amount of RWT withheld.

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RWT On Dividends: Tax and Accounting Treatment


What is RWT (resident withholding tax)

It is a tax deducted on dividend before making a payment to the shareholder. For example, if company made a profit of $100 before tax, $28 would be income tax. Net profit after tax $72 will be a liability payable to shareholders. A payment of $72 will be made to the shareholders, the name of this payment is dividend.  The IRD is interested in collecting tax from this payment, with current highest tax rate being 33%, further 5% of deduction is imposed on the company. Hence, $5 will be deducted and paid to the IRD, this is called RWT.

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Attempts made to simplify RWT deductions for small business

What are the new rules of RWT on Dividend payments for closely held small companies.

The changes on Dividend and RWT are outlined in Taxation (Annual Rates for 2016-17, Closely Held Companies, and Remedial Matters) Bill.

The bill received royal assent on 30-03-2017. This Act came in to force on the same date, and in practice from 01-04-2017 income year.

Exemption of RWT deduction on Dividend Payment between companies

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