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New Zealand – GST update

By July 19, 2018July 10th, 2021No Comments

Government Consultation to apply GST (VAT) on low-value imported goods proposals and offshore supplier GST registration system proposed from 1st October 2019

Government Consultation to apply GST (VAT) on low-value imported goods proposals and offshore supplier GST registration system proposed from 1st October 2019

A reminder of the proposals:

  • Offshore suppliers would be required to register, collect and return GST on supplies of goods to New Zealand consumers if the value of the goods is $400 or less.  Tariffs and cost recovery charges would no longer be collected on goods valued at or below this value.
  • Goods supplied to GST-registered businesses would be excluded unless the offshore supplier decided to zero-rate the supply (this would allow offshore suppliers to claim costs associated with business-to-business supplies).
  • Offshore suppliers would be required to charge GST unless the recipient identified themselves as a GST-registered business or provided their GST registration number or New Zealand Business Number.
  • A reverse charge (that is, when the recipient of the goods accounts for the GST) would apply to GST-registered recipients that use goods for non-taxable purposes (such as private purposes).

Registration requirements and return filing

  • Offshore suppliers would be required to register if their total supplies of goods and services to New Zealand exceed $60,000 a year (the registration threshold).
  • Offshore marketplaces and re-deliverers would be required to register and return GST if they meet the registration threshold.
  • A simplified “pay only” registration system is proposed to minimise compliance costs for offshore suppliers.
  • Quarterly GST filing is proposed for offshore suppliers of low-value goods. 

Enforcement, compliance and penalties

  • New Zealand has international agreements with a number of jurisdictions (including our major trading partners) that include “Assistance in Collection” provisions.  This means that if a non-resident supplier fails to comply with their New Zealand tax obligations, New Zealand can ask the relevant foreign tax authority to use its enforcement powers to help collect the GST on New Zealand’s behalf.
  • The existing penalties and use-of-money interest rules would apply to offshore suppliers as they do to domestic suppliers.  In addition, existing penalties would apply to consumers that falsely represent themselves as a business to avoid GST.
  • For the worst offenders, the rules would provide Inland Revenue with discretion to require a consumer to register and pay the GST that should have been returned.
  • Further measures to bolster compliance will be explored, for example a possible joint registration system with other countries (such as Australia) or data matching programmes between tax jurisdictions or government agencies.  This might include the sharing of information on registrations with Australia.  Another possibility is the sharing of additional information with Customs.

Maintaining effective border risk-management

  • Changes to the GST settings for low-value imported goods need to take into account implications for the way that risks to New Zealand are managed at the border.
  • Importers would still be required to provide information to Customs and the Ministry for Primary Industries to support effective risk and biosecurity assessment on low-value imported goods.

IVA Contribution to developing Global VAT/GST Legislation

The IVA have been active participants in providing input to the New Zealand Government on the GST implications for business on their low value imported goods proposals.

In common with a number of jurisdictions, New Zealand is introducing legislation (effective from 1st October 2019)  to apply GST to low value imported goods in order to ensure taxation at the place of consumption and to create a level playing field between domestic and foreign businesses.

The issues that are being considered include a simple pay only offshore supplier registration system. The scope of market place rules, double taxation issues, valuation methods for determining the proposed NZ $ 400 minimum threshold and getting the balance right between minimisation of compliance costs and to ensure the highest possible rates of compliance.

Both Stephen Dale and Mike Molony contribute to BIAC – A trusted partner to the OECD and other International Institutions – having regular discussions with International Tax administrations on International VAT/GST matters, to ensure the voice of business is heard when new legislation is planned.

The scope of the current consultation is to advise on practical measures to ensure that any legislation is fit for purpose and that the concerns of business are considered prior to the legislation being finalised.

Previous consultations for similar legislation have been held with Australia and more recently Singapore, and many changes have been taken into account by those Governments as a direct result of these discussions, prior to the legislation being finalised.

If any IVA Members have an interest in this specific field, please contact either Stephen (s.dale@hedeos-avocats.fr) or Mike (Mike.Molony@meridianglobalservices.com) directly and any contributions or input would be much appreciated.

The above information was kindly provided by Mike Molony from Meridian Global Services, Ireland.