How compensatory interest is applied.
About compensatory interest
Compensatory interest is charged to compensate the Crown for loss of use of money when duty is not paid in full and on time.
You will be charged compensatory interest if you fail to pay all your duty at the right time for any reason. This could include not paying by the due date, providing incorrect information to Customs or not entering your goods.
We may also charge penalties, in addition to compensatory interest, for the non-compliance that led to the duty not being paid. See Interest and penalties for unpaid duty for further information.
Compensatory interest is charged only when the amount owing (ie that which is subject to compensatory interest) is $1,000 or more. It is charged to the duty payer. See further details in the Customer Guide: Compensatory interest and late payment penalties (PDF 2 KB)
Compensatory interest is defined by formulas set in regulations, which are based on market interest rates. Current compensatory interest rates are shown in the table below.
The main rate aligns with that used by Inland Revenue. The reduced rate is based on the last 90 day bank bill rate published on the Reserve Bank website before 1 July. You may be eligible for the reduced rate if you voluntarily disclose an error and can demonstrate that it was inadvertent.
Table: Current compensatory interest rates
|Rate||Percentage||When interest rate starts|
|Main rate||8.22%||1 October 2018|
|Reduced rate||2%||1 October 2018|
Remissions and refund
The Act sets out the grounds for refund or remission of compensatory interest. You can apply for refund or remission using the form: NZCS 255 Application to remit or refund compensatory interest and/or late payment penalties (DOC 265 KB)
You can also read Customs operational policy for compensatory interest and late payment penalties.