Cross-Border Workers

The Bill proposes to modernise and provide clarification for employers in relation to the application of PAYE, FBT, ESCT and NRCT rules in relation to cross border workers. Current rules are not flexible enough to take into consideration the various forms of employment arrangements (short term, long term, remote, overseas, NZ vs foreign resident employer/ employee) and could give rise to incorrect application.

The Bill introduces a new definition of “Cross Border Employee”, that will cover:

NZ employee of a non-resident employer providing services in NZ, or
NZ resident employee providing services outside of NZ

Introduction of a 60 day grace period which will enable the employer to meet or correct their PAYE, FBT and ESCT obligations, where they have taken reasonable measures to manage employment -related tax obligations.

Under the proposed amendments, a volunatry disclosure will not be required where an employer or employee meets or corrects the tax due within the grace period. UOMI and penalties will not be imposed if underpayment is corrected within the grace period.

The Bill provides for the IR and the Employer of Cross Border Employees to agree on payment of PAYE obligations annually in certain circumstances and to repeal the PAYE bond provisions, which are rarely used.

The Bill introduces safe-harbour provisions for non-resident employers who have incorrectly assessed their employment related obligations. Where the safe harbour provisions are met and the employer does not have sufficient presence in NZ, the employer would be protected from the application of penalties and UOMI. Where the non-resident employer does not have the PAYE obligation, proposed s CE1F(3) clarifies that the obligation to pay and report PAYE, FBT and ESCT transfers to the employee. In addition any shortfalls in amounts withheld by the employer must be withheld by the employee s RD21.

Amendments would take effect on 01 Apr 23.

October 2022