What Are Schedular Payments?
Schedular payments are payments made to contractors for specific types of work or activities. These payments are defined under Schedule 4 of the Income Tax Act 2007 and are subject to withholding tax. This means that the payer (the business or individual making the payment) is required to deduct tax from the payment before passing it on to the contractor.
The rules governing schedular payments are outlined in Section RD 8 of the Income Tax Act 2007. This section provides the legal framework for how these payments should be treated for tax purposes.
Tax Deduction from Schedular Payments
The payer is responsible for withholding the correct amount of tax and forwarding it to the Inland Revenue Department (IRD).
To determine the appropriate tax rate, payers can refer to the Tax Rate Notification for Contractors (IR330C) form. this form includes a comprehensive list of activities that qualify as schedular payments. Examples of these activities include construction work, IT services, and consulting.
Who Can Receive Schedular Payments?
Schedular payments can be made to a variety of entities, including:
- Individuals
- Partnerships
- Trusts
- Companies
It’s important to note that contractors can be either resident or non-resident taxpayers. The tax treatment may vary depending on the contractor’s residency status, so it’s crucial to confirm this before making payments.
Schedular Payments and Self-Employment
If you’re a contractor receiving schedular payments, you’re likely considered self-employed. Self-employment includes a wide range of roles, such as:
- Contracting
- Working as a sole trader
- Running a small business
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