What is Non-Resident Contractors Tax (NRCT)
Due to skill shortages or for requirement of specific expertise, New Zealand businesses may often engage non-resident contractors for certain assignments. However, as non-residents are difficult to be tracked for filing of tax returns in New Zealand and are often not subject to withholding taxes on services provided, tax is collected from these service providers through the NRCT regime.
NRCT moves the onus for tax collection from the non-resident service provider to the New Zealand business that avails the service. Basically, NRCT works like an interim withholding tax, which is collected from the non-resident contractor’s payments and paid to Inland Revenue. At the end of the tax period, the non-resident can file a tax return and avail a refund if excess tax has been paid, or in case of a shortfall, this can be paid when the return is filed.
Contract activity or service can be –
- Performing any work in New Zealand
- Rendering a service in New Zealand
- Providing the ise of, or right to use, in New Zealand, any personal property or services of a person other than the non-resident contractor.
The person can be a natural person, company or a separate legal person.
NRCT is deducted at a default rate of 15% on any contract activity or service payment. If the non-resident has not made the required tax declaration, the rate would be 45% for individuals and 20% for companies.
Exemptions are provided in the following situations –
- The contractor has a certificate of exemption, based on a DTAA between New Zealand and the country of tax residence and all tax obligations are met in the previous 2 years.
- Payments received during the 12-month period is less than $15,000.
- If the contractor is present in New Zealand for 92 or less days in a 12-month period, and a DTAA between New Zealand and country of tax residence provides total NZ tax relief.
Please note that the above article is intended to give a general overview of the regime, if you are a non-resident contractor who is providing services in New Zealand, or are a service recipient in New Zealand of such a contractor, reach out to our expert team for specific advice on complying with and managing your NRCT obligations.
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