Income earned on investment funds is taxable income. During the term of the investment, resident withholding tax (RWT) will be deducted and paid to the Inland Revenue Department (IRD) for tax residents. Approved issuer levy (AIL) will be paid to the IRD for non-residents.
If you are a tax resident, the will be grossed-up by an amount equal to the RWT rate that is likely to be paid by the majority of eligible tax resident investors (currently set at 39 percent). In other words your interest will end up being close to the inflation rate. There will be no gross-up for non-resident taxpayers as the non-resident withholding tax deduction is set at zero.