Withholding Tax Deductions

Withholding Tax
Withholding tax is deducted from payments to people who are not employees but work for you on a contract-for-services basis.

These workers must use a WT tax code. However, they may be eligible for a certificate of exemption.

Withholding payments are:

  • Taxed at a flat rate
  • Deducted even if the worker is registered for GST.

You must show a WT tax code when you are completing the Employer monthly schedule (IR348) for a withholding payment recipient.

Responsibilities Where Workers are Subject to Withholding Tax
As an employer, you must deduct withholding tax from payments to certain workers, unless they provide you with a valid Certificate of Exemption (IR331).

You are not responsible for making deductions from withholding payments for:

  • ACC earners' levy
  • Student loan repayments.

These deductions are the contractor's responsibility.

Certificates of Exemption (IR331)
People are eligible to apply for a Certificate of exemption from withholding tax (IR331) if they:

  • are in business for themselves, and
  • are subject to withholding tax, and
  • have a good record for filing returns and paying tax when it is due.

If a worker has this exemption, you can make payments without withholding tax. However, it cannot be used to exempt an employee's salary or wages from PAYE deductions.

These certificates are issued for one year only and they must be renewed by 1 April each year.

If you are in business for yourself and wish to apply for a certificate of exemption, fill in a Request a certificate of exemption from withholding tax (IR332) and send into the IRD or get it done online. See our section "Forms and Returns".