Tax on schedular payments

All employers must deduct tax on Schedular Payments (formerly known as withholding payments), from all contractors employed to perform activities outlined in schedule 4 of the Income Tax Act 2007. As of 1 April 2010, there were legislative changes which impacted contractors working the in the horticulture and viticulture industries. Find out the rate at which to deduct schedular payments here. These payments are subject to tax at a flat rate even if the contractor is registered for GST. Find a list of the Schedule 4 activities on the back of the IR330.

Exemption from withholding tax

Employers do not need to deduct withholding tax from payments made to contractors who hold a current certificate of exemption from withholding tax. Certificates must be renewed by the contractor each year. More information regarding exemptions can be found here.

Employer Responsibilities

You must deduct tax at the rates specified on the back of the IR330 from payments to workers, unless they provide you with a valid certificate of exemption (IR331) or a certificate that authorises tax to be deducted at a lower rate. As part of your responsibilities as an employer you must show a “WT” tax code when completing the employer monthly schedule (IR348) for a schedular payment recipient.

What is withholding tax?

Withholding tax is actually now known as Tax on Schedular Payments. According to the IRD, not all contractors are created equal, and some must pay Tax on Schedular Payments/Withholding Tax depending on their activities. This is a flat rate, and is taxed regardless of whether the contractor is GST registered.

Check out more on Tax on Schedular Payments/Withholding Tax rates