Non-resident contractors tax (NRCT)

Double tax agreements - the 183-day rule

Tax relief under double tax agreements

Tax relief from New Zealand tax may be sought by non-resident contractors and employees under double tax agreements (DTAs).

Non-resident employees

A non-resident employee may seek relief from New Zealand tax if a double tax agreement (DTA) exists between New Zealand and the country or territory in which the employee is a tax resident. Relief may be available under the "Dependent services" article contained within the DTA. Usually, there are three common requirements, all of which an employee must meet to obtain relief under the treaty. They are:

• the employee's presence in New Zealand must not exceed, in aggregate, 183 days in any 12-month period
• the remuneration is to be paid by, or on behalf of, an employer who is not a resident of New Zealand
• the remuneration is not to be borne by a "permanent establishment" or fixed base of the employer in New Zealand

Note: Some DTAs refer to an "income year", "financial year" or "fiscal year" instead of a 12-month period. These references are to New Zealand's deemed income year of 1 April to the following 31 March.

Also if you’re in New Zealand for only part of a day, it is counted as being a whole day. This means that the days on which you depart or arrive are treated as “days present” in New Zealand.

Non-resident contractors

When considering whether a DTA provides an non-resident contractor with relief from New Zealand tax, the most common issues to consider are:

• whether the non-resident contractor is an enterprise, and if so, if it has a permanent establishment in New Zealand at the time the contract activity is performed
• if the non-resident contractor is an individual, what relief is provided by either the "Dependent services" or "Independent services" articles of the DTA, whichever applies to the contractor
• whether the income is deemed to be a royalty within the meaning contained in the DTA.

Many DTAs contain articles dealing with particular areas or industries that may or may not provide a non-resident contractor with relief from New Zealand tax. It is therefore important not to assume that because one DTA provides relief to a resident of one country or territory, the same relief will be provided to a non-resident contractor who is the resident of another country or territory.

Find out more

The Non-resident Contractors Team can help you with information about DTAs.

You can contact them at:

Non-resident Contractors Team
Inland Revenue
PO Box 2198
Wellington 6140
New Zealand

Phone: 64 4 890 3056
Fax: 64 4 890 4510
Email: nr.contractors@ird.govt.nz

 

 

Date published: 25 Jan 2011

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