Cross-border workers and tax arrangements

The Taxation (Annual Rates for 2022-2023, Platform Economy, and Remedial Matters) Bill (No 2) includes a number of proposed changes for cross-border workers. The changes aim to clarify the way the rules are applied and reduce the cost of compliance.

The following changes are proposed to take effect from 1 April 2023.

New employer registration requirement

Non-resident employers with employees working in New Zealand, will need to register as employers with Inland Revenue if they provide their employees with non-cash benefits or make contributions to their superannuation scheme or fund (unless an agreement is reached with the employee that the employee is responsible – this must be documented). 

This is in addition to the existing 'sufficient presence' requirement, as set out in [9]-[14] of Operational Statement OS 21/04: Non-resident employer obligations to deduct PAYE, FBT and ESCT in cross-border employment situations.

Operational Statement OS 21/04

Note: New Zealand employees will need to register as IR56 taxpayers if their employer is not required to register as an employer in New Zealand. For more information, go to our page for employees of overseas employers.

Employees of overseas employers

Safe harbour provision

A safe harbour provision will be introduced for non-resident employers who have incorrectly determined that they do not have a sufficient presence in New Zealand, and as a result, that they do not have New Zealand PAYE, FBT and ESCT obligations. 

Safe harbour will be available where the non-resident employer:

• has either 2 or fewer employees present in New Zealand at any point in the income year, or pays $500,000 or less of gross employment-related taxes in New Zealand for the income year, and
• has taken reasonable measures to manage their employment-related tax obligations within 60 days of the failure.

When the above conditions are met, the non-resident employer would be protected from penalties and interest on the unpaid tax.