News / Blog
Even playing field: The introduction of GST for international online services - Mon, 23 November 2015
GTODD LAW NEWS has already reported the imminent residential land withholding tax that is to be introduced for ‘offshore persons’. Interestingly further tax changes have been proposed in the same Taxation Bill concerning the imposition of Goods and Services Tax (GST) on cross-border services and intangibles. The Revenue Minister Todd McClay says that the measures proposed are about fairness and equity. The amendments are aimed at creating a level playing field for collecting GST and putting New Zealand businesses and jobs ahead of the interests of overseas suppliers.
The proposed amendments are an important first step in the Government’s efforts to deal with increasing volumes of online services and other intangibles purchased from overseas suppliers that should, under New Zealand’s tax rules, be subject to GST. According to the BNZ, online spending at international sites showed continued buoyancy – with the September 2015 figure up 26% on September 2014. This has flow on effects for New Zealand businesses who are put at a disadvantage because of New Zealand tax requirements.
What transactions are covered?
The proposed measures will apply GST to cross-border “remote” services and intangibles supplied by offshore suppliers including but not limited to
- e-books; and
- music; and
- videos; and
- software purchased
Ultimately the tax will cover any transaction from offshore websites to New Zealand-resident consumers, by requiring the offshore supplier to register and return GST on these supplies.
Overseas supplier obligations:
- Non-resident suppliers will be required to register and return GST when their supplies of remote services to New Zealand residents exceed NZD$60,000 in a 12 month period.
- To reduce compliance costs, offshore suppliers will not be required to return GST on supplies to New Zealand-registered businesses, nor will they be required to provide tax invoices.
- The proposed changes would broadly follow the OECD’s recommended guidelines, as well as the rules that apply in other jurisdictions, such as member states of the European Union, Norway, South Korea, Japan, Switzerland and South Africa.
- The New Zealand Customs Service is expected to release a consultation document in April 2016 that will seek public feedback on the practical implications of options.
- The proposed new rules would come into force on 1 October 2016, following enactment of the bill.
Many people will not be aware of these amendments despite the fact they will have important implications. If you are a consumer who utilises overseas websites then be prepared for an increase in online retail spending. If you are a New Zealand supplier you are likely to be positively affected by a reciprocal increase in demand for your products. Contact GTODD LAW if you have any queries about how the legislation might affect you.
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