Non-resident contractors tax (NRCT)

Non-resident contractor's tax obligations as an employer

A non-resident contractor must deduct PAYE from any salary and wages paid to any employee present in New Zealand in the service of that non-resident contractor.

The obligation to deduct PAYE from employees' remuneration is not removed by the fact that the employees may be non-residents themselves, or that the employer may not have New Zealand gross income.

Non-resident contractors who have employees present in New Zealand undertaking the contract activity on their behalf must make arrangements with Inland Revenue to account for all of the following:

• PAYE (including ACC earners' levy)
• fringe benefit tax (FBT)
• employer's superannuation contribution tax (ESCT)*

*Formerly specified superannuation contribution withholding tax (SSCWT).

For more information about employers' tax obligations, see our Employer's guide (IR335). PAYE must be deducted until such time as each individual employee's right to relief from New Zealand tax can be established to our satisfaction.

Sometimes an employee may be exempted or given relief from New Zealand tax by section CW 19(1) of the Income Tax Act 2007 [the 92-day rule] or in accordance with a double tax agreement [the 183-day rule]. It is not always possible for a non-resident contractor to determine in advance whether an employee will be entitled to the exemption provided by section CW 19(1) of the Income Tax Act 2007 or to relief under a double tax agreement.

In certain circumstances a bond or other security may be lodged with the Commissioner to waive the requirement to make tax deductions from salary or wages payable to a non-resident employee. An example is when the employee is likely to be exempt from tax in New Zealand , under the 92-day rule or the 183-day rule (see the "The 92 day rule" and "Double tax agreements - the 183 day rule" sections for more information). An employer who wants to make such an arrangement must apply in writing under section RD 23 of the Income Tax Act 2007, stating the grounds and detailing the undertakings in respect of securities guaranteeing payment.

Any decision not to deduct PAYE must be made with the consent of the Commissioner.

Other pages in: Non-resident contractors tax (NRCT)

• Types and definitions of contracts
• Double tax agreements - the 183-day rule
• Accounting for tax on schedular payments
• Exemption and special tax rate certificates
• The 92-day rule for employees
• General information for non-resident contractors
• Background and legislation
• Non-resident contractors' tax - examples
• Applications and enquiries

Date published: 25 Jun 2008

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