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Contractors receiving schedular payments

Certificate of exemption on schedular payments

You can apply for a certificate of exemption (COE) on schedular payments if you meet certain eligibility criteria. This means you won't have tax deducted from your payments.

Eligibility for a certificate of exemption 

To be eligible you need to:

  • be in business
  • receive schedular payments that are subject to tax under Schedule 4 of the Income Tax Act 2007
  • be paid by someone other than a labour hire business under a labour hire arrangement*, and
  • have a good tax compliance history with us (returns filed and payments made on time).

* a non-resident for tax purposes can apply for a COE to use for payments made by a labour hire business under a labour hire arrangement.

If you're a contractor with a COE, you won't have tax deducted from your payments. A COE doesn't apply to an employee receiving salary or wages with PAYE deducted.

If you're a contractor being paid under a labour hire arrangement

A COE cannot apply to these payments. Instead you can apply for a 0% special tax rate certificate if:

If you're doing other work (another job) that isn't under a labour hire arrangement you can apply for a COE for those payments.

If you already have a COE and receive payments under a labour hire arrangement

If you already have a valid COE and you receive schedular payments under a labour hire arrangement you can still use your COE for these payments from 1 April 2017 to the earlier of:

  • 31 March 2018, or
  • the expiry of your certificate.

After this date if you don't want tax deducted from your payments you'll need to apply for a 0% special tax rate certificate.

Requesting or renewing a certificate of exemption 

To request a certificate of exemption complete our Request for PAYE exemption from tax on schedular payments (IR332) form.

All COE holders with certificates expiring in March will receive renewal requests from us during January and February of the same year.  If you choose to renew your certificate, we'll send your new one in time for the beginning of the tax year (1 April).

Time period for certificates of exemption

COEs are credit card-sized and may be issued for up to five tax years. We'll determine the length of time based on your tax record.