CIR Calculation
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- Last Updated: Monday, 11 November 2019 02:18
Interpreting IRD CIR notification letters.
The CIR is a compulsory deduction rate applied by IRD when an employee has not been making re-payments, perhaps from only one source of income, but for whatever reason their payments are in arrears. It is in addition to the standard rate and can only be applied when an SDR is not in force. KeyPay will enforce these settings.
The rate can only be from 1 to 5% of the taxable gross income. Unfortunately, for reasons that escape us, IRD specify the rate as a percentage of the standard rate, even though it is a completely independent calculation which must be shown separately with a different tax code on the pay-day return. Typically, the rate specified by IRD is 41.67% of 12% which is actually 5% of gross and is what should be entered as the SLCIR % rate.
This issue has caused so much confusion and support calls that in KeyPay entering more than 5 will invoke a pop-up where you can enter the rate specified by IRD to calculate and apply the correct figure from 1 to 5%. I.R also usually specify the amount to be recovered and this amount can be entered on the next line. When this value has been exceeded the CIR deductions will automatically cease and the CIR state turned off.
i.e Set and forget.