Cross Border Workers Tax Rules in New Zealand

Cross-border workers are individuals employed by non-resident employers who offer services in NZ or firms with NZ residents who offer services outside of NZ. There are worries that the current policy does not take into account the complexity and evolving nature of cross-border activity, hence changes have been proposed. These will create a framework for PAYE, FBT, and ESCT that is more adaptable.

What changes have been made to Cross Border Workers Tax Rules?

The first amendment creates a safe harbor for people who wrongly determine their legal obligations. The grace period of 60 days enables underpayments to be corrected without incurring penalties and interest for that period of time.

In addition, threshold tests have been changed from an "all circumstances" to a "single payer" perspective, where the payer is now only required to take into account the requirements related to their contract with non-resident employer.

Thirdly, a new reporting requirement for anyone making schedular payments to or on behalf of a non-resident contractor is introduced under the proposed new section 23R. The reporting requirements are outlined in Section 6B of the ITA.

Fourthly, the NRCT bond clause will be eliminated, exemptions will take effect retroactively, and businesses will be permitted to establish a compliance record in order to qualify for an exemption. In terms of foreign superannuation schemes, proposed amendments suggest that employer contributions will now be taxed under PAYE rather than FBT. Additionally, FBT will no longer be applied to trailing payments as a result of changes to Section CX 26 of the ITA.

All of the aforementioned changes will contribute to more adaptable and flexible cross-border tax law.

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