Writing an Invoice, the IR330, GST, withholding tax and more....
1 Your taxation status
2 Legal requirements of an invoice
3 IRD and GST number
4 Tax Code declaration
5 Taxation Rate
6 Certificate of Exemption (IR331) from Withholding Tax
7 Student Loans
8 Production requirements
9 Important notices on invoice
10 Essential information on the invoice
1.Your taxation status
Many of workers in the screen production industry are treated by the tax system as a “self-employed individual” on a contract-for-service basis. The NZF&VTG recommends that all screen production workers use the services of an accountant to ensure you receive the correct advice regarding taxation requirements and liabilities. The Tax Code and Withholding Tax sections of this article do not apply to companies.
2. Legal requirements of an invoice
Your invoice is a legal document presented by yourself as a business. It must be clearly written and it has minimum legal requirements.
3. IRD and GST numbers
All invoices must display your IRD number. You must register for GST if income in the previous year and/or in the next 12 months is over $40,000. You can voluntarily register for GST if your income is less than $40,000. If you are GST registered, you must display your GST number and the invoice must clearly state “Tax Invoice”. If you are not GST registered, you cannot include GST on your invoice.
4. Tax Code Declaration
You must fill out an IR 330 form for every production company that you work for in each financial year. Your tax code is “WT” (all other codes apply to non-self employed people).
5. Taxation Rate
The standard withholding tax rate for screen production industry personnel is 20% (changed from 25% at request of the Guild, providing a fairer rate - equivalent to that of actors - for lower paid workers in FPI).
Unless you have a Certificate of Exemption (IR331) from the IRD, the production company may insist that Withholding Tax is deducted. If you do not complete the tax code declaration, display your IRD/GST number or any other IRD requirement, the production company can deduct Withholding Tax at a rate of 40%.
If you are having Withholding Tax deducted it pays to write this on your invoice. Suggestion is "Please deduct 20% Withholding Tax from any labour in this invoice". Not every production company will take Withholding Tax off your invoice (especially the smaller companies).
6. Certificate of Exemption (IR331) from Withholding Tax.
If you pay Provisional Tax (and are not a company) then you must provide each company with a Certificate of Exemption (IR133). Typically, if you have substantial income from equipment rental in addition to your income for services then you can probably get a certificate of exemption from withholding tax.
People are eligible to apply for a Certificate of exemption (IR 331) if they are:
a) in business for themselves, and
b) subject to Withholding Tax.
These certificates are issued for one year only. They must be renewed by 1 April each year.
7. Student Loans
No student loans can be deducted from independent contractor/partnership/company invoices. Student loans payments must be made direct to the IRD.
8. Production requirements
Your invoice will be read by an accountant who will not know who you are, what you do, or what work you have done.
- Write your name, your trading name and your craft position.
- Consider a separate timesheet for calculating overtime and penalty payments.
- Consider separate invoices for personal services, equipment fees and reimbursement of expenses. Withholding Tax is not deducted from these items and invoicing separately prevents confusion
- If reimbursement of expenses is required, copies of receipts should be attached behind your invoice to the production company. You should keep originals for your own tax records.
9. Important notices on the invoice
- Terms of Services. Once you have performed your services, the production company is in debt to you. The Guild recommends that the following term be written on all invoices:
"Terms of Services – Payment is due within seven days of receipt of invoice”
- Penalty Interest. You can legally charge interest at your annual overdraft rate plus a small service fee, eg. Overdraft: 16% + 2% service = 18% pa or 1.5% per calendar month. If the production company fails to pay by the due date they are legally liable for the interest penalty only if you tell them. 1% per month isn’t much but it’s your legal right:
“Late payment interest penalty rate: 18% per annum / 1.5% per month”
- Bank Account Information. Many production companies pay accounts by Direct Credit.
` “Direct Credit Account: Bank Name, Bank Branch, Account Number”
10. Essential information on the invoice
- If you are GST registered the words "TAX INVOICE" must be in a prominent place
- Your name and trade name (the supplier), address
- Your GST number or IRD number if not GST registered
- The name and address of the recipient of the supply (i.e. the production company)
- The date the invoice was issued
- The name of the production
- The production, job or order number provided by production company
- Description of and date the goods/services were supplied
- Description of the quantity of goods/services
- A tax (GST) invoice must either have "Subtotal", "GST Total", "Total" or "Total Invoice" with GST inclusive written beside
- If you are giving discounts, free travel or free overtime, or any form of reduced rates, it is suggested that you write your invoice with the full chargeable amount shown and the reduced rate that is charged. In this way producers are aware of the true cost of production and your personal contribution.