Tax implications for independent contractor
First, the taxpayer needs to make sure that they are working as self-employed contractors. This article provides the test and guidance to decide whether a taxpayer is an employee or an independent contract.
A self-employed contractor will pay tax at the withholding tax rate if they perform activities as in this table. Other contractors do not need to deduct tax if they don’t perform those activities above.
Independent contractor is responsible for meeting their own tax obligations. As a contractor, you will have to file IR3 income tax returns every financial year even if you pay withholding tax or not. In the IR3, contractor can claim expenses against the income they earn.
It is also compulsory for a contractor to be registered for GST and file GST returns if their turnover is more than $60,000 a year. If a contractor registers for GST, they must account for GST on their income.
Disclaimer: The following answer necessarily sets out general principles only. The facts of particular cases always need to be considered carefully, and it may be necessary to obtain advice from a tax expert.
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