Changes to tax rules affecting the horticulture and viticulture industries

From 1 April 2010 there will be some changes to tax rules. If you directly hire any type of contractor (individual, partnership, trust, or company) for work or services for the supply of labour or substantially for the supply of labour on land in connection with:

• fruit crops
• orchards
• vegetables, or
• vineyards

you'll need to deduct tax from the contractor’s payments at the rate of 15 cents in the dollar. This is unless the contractor has a certificate of exemption or a certificate authorising tax be deducted at a specified rate.

Activities that are covered

Any payment for:

• agricultural, horticultural, or viticultural work or services under contracts or arrangements that are wholly or substantially for the supply of labour on or in connection with land used or intended to be used for:
  • fruit crops
  • orchards
  • vegetables, or 
  • vineyards. 

The principal term is wholly or substantially for the supply of labour.

Activities that aren't covered

• post-harvest facilities for work or services provided
• a management entity under a formal management agreement under which the entity is responsible for payment for the work or services provided.

If you're hiring a contractor or sub-contractor

If you’re a grower directly hiring a contractor, or a contractor hiring a subcontractor, your responsibilities under the new rules are to:

• add the required information to your current employer monthly schedule (EMS), if you’re already registered as an employer
• register with us as an employer if you’re not currently an employer and will be directly hiring contractors
• deduct tax from payments for all activities covered, at the appropriate rate. See the appropriate rates on our IR330. Go to "Forms and guides".

If the contractor doesn’t have a certificate of exemption record the:

• contractor’s name
• start date
• IRD number
• amount of the gross payment, and
• tax deducted.

The tax code to use is "WT" even if they have a certificate of exemption or a special tax rate.

You should also include the gross schedular payment details in the “Earnings and/or schedular payments not liable for ACC earners’ levy” column in your employer monthly schedule. This will ensure you don’t get charged ACC earners’ levy on the schedular payments made.

Certificates of exemption and special tax code certificates

No tax is deducted if a contractor holds a certificate of exemption. If a contractor holds a special tax code certificate, the employer deducts tax at the rate specified on the certificate.

If you're a contractor, you can apply online for a certificate of exemption.

Tax codes for contractors

A contractor needs to give their employer an IR330 (tax code declaration) showing the “WT” tax code. The employer then deducts tax at the standard rate of 15 cents in the dollar. This is unless the contractor holds a valid certificate of exemption or special tax code certificate.

Please sight the original certificate and check that it's in the name of the contractor being used. If you want to check the authenticity of the certificate please call 0800 377 772. You should keep a copy of the certificate for your records.

A contractor without a certificate of exemption or a fully completed IR330, has tax deducted at the no-notification rate of 30 cents in the dollar.

Tax and GST for contractors

To calculate GST and tax from a contractor's tax invoice where no certificate of exemption is provided, see the example below.

Find out more

• your responsibilities as an employer, or
• see our booklet Employer’s guide (IR335) go to "Forms and guides", or
• call us on our employer line on 0800 377 772.

Date published: 30 Mar 2010

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