Goods and services tax on cross-border services and intangibles

16 December 2015

The amendments proposed in the Bill apply GST to cross-border “remote” services and intangibles supplied by offshore suppliers (including e-books, music, videos and software purchased from offshore websites) to New Zealand-resident consumers, by requiring the offshore supplier to register and return GST on
these supplies.

Currently, GST is not collected on cross-border services and intangibles that are purchased from offshore suppliers.

The amendments are intended to maintain the broad base of New Zealand’s GST system and create a level playing field between domestic and offshore suppliers of services and intangibles.

GST is also not collected on low-value imported goods that are below the “de minimis” threshold (typically goods below the value of NZ$400). The Bill does not impact the collection of GST on these goods. Instead the measures in the Bill are intended to be the first step in the process of collecting GST on overseas purchases.

Although this is an important issue for New Zealand retailers, the Government is not willing to move unreasonable cost or inconvenience on to consumers.

For this reason, Customs has been asked to work through a number of logistical issues with stakeholders and is expected to release a consultation document in April 2016 that will seek public feedback on the practical implications of options to streamline the collection of duty, including GST, on low-value imported goods.

The main features of the proposals are as follows:

  • Offshore suppliers of services would be required to register and return GST on remote services purchased by New Zealand-resident consumers.
  • To ensure compliance costs are minimised, offshore suppliers will not be required to return GST on supplies to New Zealand GST-registered businesses, nor will they be required to provide tax invoices.
  • Offshore suppliers would be required to register and return GST if their supplies of services to New Zealand residents exceed NZ$60,000 in a 12-month period.
  • A broad definition of “remote” services is proposed, which includes both digital services (such as video, music and software downloads) and more traditional services (such as legal and accounting services received remotely).
  • In some situations, an electronic marketplace may be required to register instead of the principal offshore supplier.

The proposed rules will come into force on 1 October 2016.