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Inland Revenue

Tax Policy

PUBLISHED 18 September 2003

Tax rules for non-resident contractors to be simplified

The tax rules on payments to non-resident contractors are to be simplified, Revenue Minister Michael Cullen announced today. The changes include extending the time that contractors eligible for relief under a double tax agreement may work in New Zealand without having to seek a certificate of exemption, and exempting payments for contract work amounting to less than $15,000 within a 12-month period. For more information see the media statement.

Hon Dr Michael Cullen
Minister of Revenue


Non-resident contractors' withholding tax simplified

The government will simplify the tax rules on payments to non-resident contractors to reduce compliance costs for both employers and contractors, Revenue Minister Michael Cullen announced today.

"The present rules result in employers having to go to disproportionate efforts to withhold tax from the pay of very short-term, non-resident contractors often for small amounts of money or face penalties for failing to do so.

"In many cases, these contractors are relieved of paying New Zealand income tax anyway, by the nature of the double tax agreement between New Zealand and their own country.

"At present, contractors who work in New Zealand for fewer than 62 days in a 12-month period and come from a country with which we have a double tax agreement do not have to seek a certificate of exemption from withholding tax.

"That 62-day period will be extended to 92 days, which will help to save time and effort for employers and contractors alike.

"A further change will exempt payments for contract work amounting to less than $15,000 in a 12-month period from non-resident contractors' withholding tax. Instead, contractors themselves will be responsible for paying any New Zealand tax owing at the end of the year.

"The changes will be made by Order in Council within the next few weeks and will apply from 1 December 2003.

"The government will also be introducing legislative changes in the next taxation bill to reduce both penalties in certain cases and the 'non-declaration' withholding tax rate for contractors that are companies," Dr Cullen said.

Contact: Patricia Herbert [press secretary] 04-471-9412 or 021-270-9013. E-mail [email protected]
Technical inquiries to Helen Mackenzie [tax advisor, Dr Cullen's office] 04-471-9728.