CE 1FTreatment of amounts derived by cross-border employees

1. This section applies in certain circumstances when an employer pays a PAYE income payment to a cross-border employee who provides services in New Zealand. For this purpose, the payment may include an amount paid to the person after they have left New Zealand that is a payment for services provided by the person while they were in New Zealand.

2. When the employee remains on the employer’s payroll system in a country or territory outside New Zealand, the PAYE income payment is treated as derived by them on the 20th day after payment when the employer chooses to deliver their employment income information under section 23J(3) of the Tax Administration Act 1994.

3. When an amount of tax is not withheld or when payment is insufficient as described in section RD 21, RD 62B, or RD 71B, as applicable, and the employee must undertake the relevant tax obligations in relation to employment, they must do so as if an employer, and, for this purpose, may pay the initial amount of tax for the payment as a lump sum.

4. Subsection (3C) applies when the employer or other person that the PAYE rules apply to under section RD 2(2) has taken reasonable measures to manage their employment-related tax obligations, and—

5. the employee is a New Zealand resident working outside New Zealand for a period, and during that period the employee receives an unexpected PAYE income payment:
6. the employee is present in New Zealand for a period during which they—
   1. have breached a threshold under section CW 19 (Amounts derived during short-term visits):
   2. have breached a threshold set out in a double tax agreement:
   3. have received an unexpected PAYE income payment in the period.

7. The employer or other person that the PAYE rules apply to has a 60-day period within which they must make a reasonable effort to meet or correct their tax obligations relating to the PAYE income payments, employer superannuation cash contributions, or fringe benefits made or provided to the employee for the time the employee was in New Zealand.

8. The 60-day period referred to in subsection (3C) starts to run from the earlier of—

9. the date of the breach or the payment, as applicable:
10. the date on which the employer could reasonably foresee that a breach or a payment, as applicable, will occur.

11. When the employee has undertaken to meet their employment-related tax obligations under subsection (3) for the period during which they are in New Zealand, the employee may be treated as the employer for the purposes of subsection (3C), making the grace period available to the employee.

12. For the purposes of this section and sections CE 1(3B), RA 15(4B), RD 62B, RD 65, and RD 71B, and sections 23IB, 120B, and 141ED of the Tax Administration Act 1994, a cross-border employee—

13. means—
    1. for a person providing a service in New Zealand, an employee of a non-resident employer:
    2. for a person providing a service outside New Zealand, a resident employee; and
14. includes a secondee or a person who provides a service for or on behalf of a person who is not resident in New Zealand.