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Employer responsibilities
Ngā kaiwhakawhiwhi mahi takohanga

Certificates of exemption from tax on schedular payments

Individuals, trusts, partnerships and companies can apply for a certificate of exemption (COE) if they:

  • are in business
  • receive schedular payments that are subject to tax under Schedule 4 of the Income Tax Act 2007
  • have a good tax compliance history with us. This means:
    • filing returns and making payments on time, and
    • using the right tax codes for employees, eg if an employee doesn’t give you a tax code declaration, then tax is deducted at the no-notification rate.

If a contractor has a COE, you can make payments without deducting withholding tax. It can't be used to exempt an employee's salary or wages from PAYE deductions.

If a New Zealand contractor is paid under a labour hire arrangement, instead of applying for a COE they can apply for a special tax rate certificate with a 0% tax rate. If their tax compliance history with us is good, we'll grant this rate.

If the contractor has a valid COE and you're paying them under a labour hire arrangement,  you can't use the COE for these payments after 31 March 2018. They'll have to provide you with a valid special tax rate certificate.

You'll need to record the contractor's start and end dates, and payment details on your Employer monthly schedule/Employer information (IR348) returns when they give you a 0% special tax rate certificate.

Contractors also doing other work not under a labour hire arrangement can apply for a COE for this work.

Checking the certificate is valid

If you're not sure if the contractor has given you a valid COE we can check this for you. We'll need the certificate details when you contact us.

Request or renew a COE

A contractor can request a certificate of exemption through myIR.

During January and February, we send renewal requests to all Certificate of exemption from withholding tax (IR331) holders with certificates expiring at the end of March of that same year. If they choose to renew their certificate, we'll send the new one in time for the beginning of the tax year (1 April).