Current Tax Treatment

As of now, payers are not required to withhold non-resident contractors tax (NRCT) if the payment is exempt under the:

• 92 days of presence rule or
• $15,000 de minimus rule

The payer must also consider matters such as

• Days of presence unrelated to the contract
• Contract payments made to the contractor for all activities or services

The above matters are unrelated to the contract payment and impose an excessive compliance burden on the payer.

What is changing?

The proposed amendments require the payer to only consider the thresholds relating to their contract with the non-resident. As a result, the tests to be considered when applying the NRCT thresholds, have been modified:

• 92 Day Test

If the days on which the non-resident contractor is in NZ to perform contractual duties is under 92 days, then the payer is not required to withhold NRCT. The 92 days include weekends and holidays during contract period but excludes days for which contractor is present in NZ for purposes unrelated to the contract.

• $15,000 Test

If payments related to the contract made to the contractor are below $15,000, then the payer is exempt from withholding tax.

For more information and advice regarding non-resident contractors tax, get in touch below.

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