International contractors may be drawn to the natural beauty and highly developed economy of New Zealand. If you are looking for clients in New Zealand, you will want to understand the immigration procedures and tax rules for self-employment. How you structure your business and contracts will determine how you get paid by your clients. This guide will cover these topics so that contracting in New Zealand is in full compliance.
What visas do I need to be a contractor in New Zealand?
Because of the country’s desirability, work visas can be a challenge to obtain for some contractors, but there are a few options available. As a contractor, the work visas available will depend on what country you are from, as New Zealand uses a reciprocity and quota scheme. There are several visas that you can use to work as a New Zealand contractor if you meet the criteria.
The first is the Entrepreneur Work Visa, which is granted when you are starting a business such as a limited company. But it is fairly expensive at US$2000 and requires an investment of $65,000. If you are under 35 you might qualify for the Working Holiday Visa which is valid for 1 or 2 years. Both of these visas allow self-employment
If those are not feasible you would have to obtain an employment work visa either through your client or an umbrella company.
How do I get paid as a contractor in New Zealand?
You have a few options for getting paid in New Zealand depending on how you structure your contract.
Work as a self-employed freelancer
If you want to work as a self-employed New Zealand contractor, then you would have to qualify for one of the visas discussed. Otherwise, you would need to become an employee of your client. If you can get a visa, you would invoice your client directly as set out in your contract, and set up a payment method.
Set up your own limited company
If you commit to contracting in New Zealand, you can set up your own limited company. It does have the advantage of potentially qualifying for an Entrepreneur visa. You would bill your client through the company and would have to meet all business and tax regulations.
Work with an umbrella company in New Zealand
In terms of work visas and payment, using an umbrella company is the easiest way to get paid in New Zealand. The umbrella company is an intermediary to your contract with the client and facilitates all billing and payment. They can also sponsor your work visa if you meet the qualifications. The umbrella company would handle all of your tax withholding and ensure that you get paid on time.
How do taxes work for contractors in New Zealand?
Income tax rates in New Zealand for self-employed are 10.5%-39%, which are the same rates as employees. One difference as a self-employed is that for annual revenue over $60,000 you have to collect GST of 5% from your clients. Either that or you will pay it yourself.
Tax residency rules in New Zealand
When you stay 183 days in 12 months, tax residency in New Zealand is triggered. Tax residents pay tax on worldwide income, but New Zealand does have tax treaties with many countries to offset additional tax. Short-term stays totalling 92 days or less in a year by non-residents give you access to a complete exemption from income tax.
How to file taxes in New Zealand
The tax year ends on March 31st, and you are required to file taxes if:
- You are a resident, and you have income that does not have tax withheld at source, or you are a non-resident for part of the income year; or
- You are a non-resident, and you have New Zealand-sourced income that does not have tax withheld at the source.
Step 1: Prepare the Relevant Documents and Information
To file taxes, you will need:
- Your IRD Number (call 000 227 774 if you don’t have one)
- Your summary of earnings (this will be sent to you in May, or you can use the IRD website)
- Any other income details e.g., overseas, rental property, farming or business income
- Any interest or dividend statements
- Any taxable Maori authority distribution statements
- Any portfolio investment entity investor statements
Step 2: Register for myIR (if filing online)
If you’re filing online, register for myIR Secure Online Services here. This is a 3-step process and you will need your IRD Number.
- Request a Taxpack (if filing by paper)
- Use the Request and IR3 Taxpack service on the Inland Revenue Department (IRD) website.
- Your Taxpack will be posted to you and should arrive in approximately 10 working days.
Step 3: File Taxes
- To file taxes online, use your myIR Secure Online Services account.
- To file by paper, complete the forms sent to you in the Taxpack and post them to:
PO Box 39090
Wellington Mail Centre
Lower Hutt 5045
You can find comprehensive guides on how to complete your tax forms on the IRD website. Click here for the individual income tax return guide. Once you file your IR3 return, the IRD will process it and send you an acknowledgement to confirm your assessment within 10 weeks.
What are the social security contributions in New Zealand?
There are no social security contributions required for a New Zealand contractor.
Can I work remotely for a company in New Zealand from my own country?
If you have found a client in New Zealand, they might allow you to fill the role remotely from your home country. This would allow you to avoid all the immigration and tax regulations, while still gaining a new client. This would only work for roles that can be performed easily online, and if your client is open to the idea. Keep in mind, that they might ‘localize’ your pay rates, meaning you won’t get the same rate as if you were physically contracting in New Zealand.
How do I stay compliant while contracting in New Zealand?
When you are ready to begin contracting in New Zealand, compliance will be a paramount concern. Whether it’s work permits, tax withholding or banking, it helps to have a local partner involved in the process. This is where an umbrella company can be invaluable, as they are already set up and ready to facilitate your client contract, invoicing and payments.
This takes the guesswork out of the most important part of your contracting journey: receiving accurate and timely client payments into the account of your choice.
Other benefits of umbrella companies include:
- Manages all client payments, tax withholding and any social contributions
- Issues you a payslip each month, to a local or foreign account
- Sponsors work permits
- Helps set up the contract with the client
- Moderates any disputes with your client
- Advises on access to totalization and double taxation treaties
If you have questions about how an umbrella company can help you as an international contractor, please contact us at Contractor Taxation.