Skip to main content
SR 1981/304
01 Nov 1981

Income Tax (Withholding Payments) Regulations 1979, Amendment No 3

Archived legislative commentary on the Income Tax (Withholding Payments) Regulations 1979, Amendment No 3 from PIB vol 115 Nov 1981.

This commentary item was published in Public Information Bulletin Volume 115, November 1981

More information about Public Information Bulletins.

Withholding Tax on Non-Resident Contractors

The Income Tax (Withholding Payments) Regulations 1979, Amendment No 3 has recently been made by Order-in-Council. It gives effect to the Government's announcement in July this year that a withholding tax on payments to overseas contractors would be introduced.

The main features of the withholding tax are:

Rate of Tax and Application Date

The rate is 15 percent of gross payments made to non-residents, whether they are companies or individuals (other than employees), in respect of specified contract activities or services. It applies to payments made on or after 1 January 1982.

Interim Tax

The withholding tax is not an additional tax but a payment on account of the non-resident's annual income tax liability. The tax is neither a minimum nor a final liability. The non-resident's final tax liability will be determined by annual assessment in the normal way. Any refund or further tax to pay will be determined when the tax return for the year is filed.

Liable Payments

The withholding tax will be required to be deducted from payments to non-residents in respect of any "contract activity ". A "contract activity" is:

  1. work carried on in New Zealand in relation to:
    • construction, installation, assembly and similar projects, or
    • consultancy, advisory and other professional or technical services in respect of such projects.
  2. the hire of personnel or equipment to be used in New Zealand.

Exempt Payments

  • Payments which are a direct reimbursement of the non-resident's costs will be exempt from the withholding tax except where the non-resident and the payer are associated persons.
  • Payments which are 'royalties' within the meaning of the Tax Act.

(Note: Royalty payments to non-residents are subject to Non-Resident Withholding Tax).

Exemption Certificates

Exemption certificates may be granted, on written application by the non-resident contractor, where:

  1. the Commissioner of Inland Revenue is satisfied that, by reason of a double tax treaty or for any other reason, the income is exempt from New Zealand tax.
  2. the non-resident contractor provides a bond or other form of security satisfactory to the Commissioner, securing payment of any tax which is, or may become, payable in respect of the contract activity.
  3. the Commissioner is satisfied that the non-resident contractor has complied with his tax obligations in the 24 months immediately preceding the application and will continue to comply in the future.

Special Rate Certificates

The Inland Revenue Department can issue, on application by a non-resident contractor, special tax rate certificates authorising a lower or higher rate of withholding tax. An amended rate would normally be based on a certified budget of expected revenues and expenditure or on the basis of previous years tax returns. Any special rate would be for a limited period and would be reviewed in the light of actual results.

Accounting for the Withholding Tax

The withholding tax is to be deducted by the payer of contract monies in a similar manner to that applying to other withholding payments. The tax so deducted is to be accounted for to the Department as part of the normal monthly PAYE tax remittances. An IR13 withholding payment deduction form is also to be completed in respect of each non-resident contractor.


Any enquiries about the tax or applications for exemption or special rate certificates should be addressed to:

The District Commissioner, Inland Revenue Department, Private Bag, WELLINGTON.