May 2017 Newsletter Articles.

Labour Pains... With-holding Tax

Do you have questions around the new With-holding tax rules for those contractors operating through a labour-hire company?

Here's a basic overview of the new rules which took effect from 1 April (or you can deter to 1 July):
A labour-hire firm is defined as 'an entity which has as one of its main activities the business of arranging for a person to perform work or services directly for clients of the entity'. There have been issues from this definition but what is clear from the IRD's policy team is that the standard consulting arrangement, whereby 'Luke' contractor operates via his contracting company 'Luke's Consulting Ltd' and provides services to the ultimate client – say Spark, remains outside of the new rules. This is because Luke's Consulting Ltd's activity is not arranging contractors for clients in the original course of its business.

The upshot of the new rules is that contractors can now select their own WHT tax rate. Tax Policy has included the following table to assist us to determine the rates of WHT that may apply. 

Description

Rate

Elected rate

Chosen by the payee

10%-100%

(15%-100% for non-residents and holders of temp. visas)

Special rate

Payee can request from Commissioner

Only necessary if the payee wants a rate lower than 10% (or 15% as above)

No notification rate

When the payee does not provide name or IRD number to the payer

20% for non-resident companies

45% for other contractors

Prescribed rate

Set by Commissioner when the payee has not met a liability under the IR Acts

Cannot exceed 50%

Non-resident entertainer rate

Must be used by non-resident entertainers

20%

Standard rate

The rate for the activity or arrangement set out in schedule 4, which will apply if none of the rates set out above apply.

Vary between 10.5%-33% depending on the type of activity or arrangement

There are a number of rules around this tax that can be a bit confusing at first, if you have any queries at all, give us a call to discuss.

 

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