Exemption and special tax rate certificates

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Exemption and special tax rate certificates

This page outlines how non-resident contractors may apply for a certificate of exemption from non-resident contractors’ tax (NRCT) or a special tax rate certificate that allows them to pay tax at a greater or lesser rate than the standard NRCT rate of 15 percent.

Certificate of exemption

Under section 24M of the Tax Administration Act 1994, if a non-resident contractor applies in writing, Inland Revenue may issue them an exemption certificate. The certificate of exemption will specify that no non-resident contractors' tax (NRCT) is to be deducted from contract payments made in respect of the contract activity stated on the certificate, and will specify the period for which the certificate is valid. The Commissioner can only issue an exemption certificate to the non-resident contractor if the conditions of one of the following three subparagraphs are satisfied:

(a) The Commissioner is satisfied that any amount derived, or which may be derived, by the non-resident contractor will not be gross income, whether by reason of any double tax agreement (DTA) or for any other reason.
(b) The non-resident contractor gives to the Commissioner a bond or other form of security which is satisfactory to the Commissioner, securing the payment on terms acceptable to the Commissioner of any income tax payable or which may become payable by the non-resident contractor on any amount derived or which may be derived by the non-resident contractor from that contract activity. (Contact us for further details on bond requirements, you will find our contact details in the "Applications and enquiries" section.)
(c) The Commissioner is satisfied that:

the non-resident contractor has, in the 24-month period immediately preceding the date on which the application is made, paid every amount of income tax payable by the non-resident contractor, in that period, under the Income Tax Act 2007 (the Act), and in all other respects complied with their obligations arising in that period under the Act and the Tax Administration Act 1994, and
the non-resident contractor will continue to comply with these same obligations on and after that date.

An application for an exemption certificate must be in writing, stating the reason(s) a certificate is requested. A certificate will not be issued to cover contract payments that have already been made. The certificate only applies from the date of issue and only covers contract payments made during the period specified on the certificate.

Special tax rate certificate

A non-resident contractor may apply to Inland Revenue for a special tax rate certificate. Under section 24N of the Tax Administration Act 1994, when a person applies for such a certificate the Commissioner may issue one specifying that NRCT is to be deducted from any payment at the special tax rate specified on the certificate. The certificate can be issued at a rate higher or lower than the standard NRCT rate.

A non-resident contractor will usually request a special tax rate certificate when their actual or potential New Zealand tax liability is less than or greater than the standard 15 percent tax rate. The rate at which a special tax rate certificate is issued is calculated based on the expected gross income less allowable deductions from the contract activity. New Zealand tax laws are applied to the determination of the taxable profit. A certificate will not be issued to cover contract payments that have already been made.