Current Tax Treatment

Under the current NRCT rules, an exemption from withholding NRCT can be obtained so long as the following conditions are met:

• The amount of the payment is not assessable income
• The contractor provides a bond or other security for the income tax payable amount
• The contractor has a good compliance history in the past 24 years which is expected to continue

Proposed Amendments

The amendments propose to improve the flexibility of NRCT exemptions by:

1. Enabling exemptions to have retroactive effect

This means if an exemption is issued after the date of the 1^st contract payment, payments made before the issue of the exemption, in  the retroactive period, can be covered. The retroactive period is limited to 92 days before the person applied for the exemption.

2. Enabling an associated NZ entity to establish good compliance history for a non-resident contractor

A non-resident contract with no presence in NZ is unable to establish good compliance history for the purposes of obtaining an exemption. Under the new nominated taxpayer approach, an associated NZ entity would be able to establish good compliance history for the purpose of obtaining exemption certificate for associated non-resident contractors.

3. Repealing the NRCT bond provision

The current NRCT rules provide that a non-resident contractor can apply for an exemption certificate so long as they have provided a bond or other security for the income tax payable for the contract payment.

Effective Date

The proposed amendments will be effective from 1 April 2024.

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