Withholding Tax

What is withholding tax?

Under a withholding system a person making certain types of payments is required to withhold a portion of that payment and pay it to IRD. The amount withheld and paid to IRD is a credit against the tax payable by the person receiving the payment.

In some cases the amount of tax withheld is a final tax which means that the person receiving the payment will have no further tax payments to make in relation to that transaction.

From which payments do I withhold?

Tax is required to be deducted from certain payments made to residents and certain other payments made to non residents. A full list is detailed below.

When is tax deducted?

The tax is deducted at the set rate at the time you make the payment to the worker or
other business.

When do I pay the tax to IRD?

All withholding taxes deducted during the month must be paid to IRD by the 15th day of the following month. For example, tax deducted during January must be paid to IRD by 15th February.

You must also lodge a monthly summary form with your payment – this is called an IR16 form.

Withholding Tax Return Forms

Paying income tax

At the time you make the payment to the worker or other business you must provide them with evidence of the amount deducted. This can be shown on the invoice or a letter given with the payment or you can use the IR16 monthly summary form.

You must also provide the payee with an annual certificate by 31 January following the year of deductions. A copy of this must also be provided to IRD – this is called an IR14 form.

Withholding Tax Return Forms

Summary of Obligations

  • Provide the payee with evidence of the tax deducted (IR16); Pay the tax to IRD by the 15th of the following month and give IRD your IR16
  • Provide the worker/business with an annual certificate IR 14 by 31 January following the year of deduction
  • Provide a copy of all you IR14s to IRD by 31 January following the year of deduction.

Payments Made to Non-Residents

Payments Made to Residents