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Employer responsibilities
Ngā kaiwhakawhiwhi mahi takohanga

Certificates of exemption from tax on schedular payments

Individuals, trusts, partnerships and companies are eligible to 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 returns are filed and payments are made on time. As an employer, this also means that the correct tax codes are used for employees, eg, if an employee doesn’t provide a tax code declaration, then tax is deducted at the no-notification rate
  • are not paid by a labour hire business under a labour hire arrangement, unless they are a non-resident.

If a contractor has a certificate of exemption, you can make payments without deducting withholding tax. It cannot 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 they can apply for a special tax rate certificate with a 0% tax rate instead. If they have a good tax compliance history with us we will grant this rate. You will still need to record the information about the contractor's start and/or end date and payment details on your Employer monthly schedule (EMS/IR348) where the contractor provides you with a 0% special tax rate certificate.

If a contractor is also doing other work not under a labour hire arrangement they can apply for a COE for the other work.

If the contractor already has a valid certificate of exemption and you are paying them under a labour hire arrangement you can use the COE for these payments from 1 April 2017 to 31 March 2018, or the expiry date of the COE if before 31 March. After this date they will have to provide you with a valid special tax rate certificate.

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. Have the certificate with you when you call us on 0800 377 772.

Request or renew a COE

A contractor can request a certificate of exemption, under "Get it done online".

During January and February each year, we send renewal requests to all Certificate of exemption from withholding tax (IR331) holders, who have 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).

The certificate

COEs valid from 1 April 2007 are credit card-sized, and may be issued for up to five tax years. We will determine the length of time based on the contractors good tax record.