The New Zealand Government recently announced a range of proposed tax changes, including some significant updates to how tax works in the gig and sharing economy.
From 1 January 2024, the Taxation (Annual Rates for 2022-23, Platform Economy and Remedial Matters) Bill (No. 2) proposes that sellers participating in the gig and sharing economy would have to disclose personal and tax related information to operators of digital platforms, who in turn would provide the information to New Zealand Inland Revenue.
This applies to sellers who use digital platforms that facilitate the supplies of short-stay accommodation, personal services (including any time or task-based work, such as ride-sharing, food and beverage delivery, and graphic and web design services), sale of goods and vehicle rentals. Think Uber, AirBnB, Deliveroo...
From 1 April 2024, the Bill also proposes GST changes to “level the playing field”, reduce non-compliance and shift the burden of GST to the digital platform provider; irrespective of the sellers’ GST registration status.
Shaneen Tie takes us through the key proposed changes for the gig economy, which applies to ride-sharing, food and beverage delivery, and short-stay accommodation rentals.
What changes does the Bill propose?
New Zealand-based platform operators that facilitate the aforementioned services would be required to perform due diligence and collect information about sellers using their platforms.
This information would then be required to be reportedto Inland Revenue. To the extent that the information relates to New Zealand tax residents, Inland Revenue would use the information for tax administration purposes to ensure that the correct income has been included in the sellers’ income tax returns. To the extent that the information relates to non-resident sellers, it is envisaged that Inland Revenue would share the information with the relevant overseas tax authority.
Operators would be required to collect information on sellers on their platforms from 1 January 2024 and report the information to Inland Revenue in early 2025.
There are exemptions for certain sellers, including large hotel operators (who supply at least 2,000 nights of accommodation per year), government entities and entities (including related entities) that are listed on an established securities market.
What information must be disclosed?
Operators would be required to conduct due diligence on sellers that are active on their platform, and collect the following identifying information about the sellers:
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Name
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Date of birth
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Address
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Tax file number (including jurisdiction that issued the tax file number)
Operators are also required to consider the seller’s tax residence, based on address information provided by the seller. Sellers who provide false or misleading information to the operator, or do not provide information to the operators after a reasonable timeframe, may be liable for a penalty of $1,000.
GST
What changes to GST does the bill propose?
Operators of digital platforms that facilitate the supply of short-stay accommodation, ride-sharing, food and beverage delivery services, as well as other closely connected services (such as cleaning services for short-stay accommodation) would be required to collect and return GST on behalf of sellers that listed on their platforms. The changes would apply to the supply of services on or after 1 April 2024.
What is required of the operators of digital platforms?
Operators would account for GST on services supplied through their platforms, by filing the relevant GST returns with Inland Revenue and paying the GST to Inland Revenue. Operators would be required to collect sufficient information about sellers listed on their platforms to determine if a seller is or is not GST registered.
If a seller is not GST registered, the operator would apply the “flat-rate credit scheme”. As a non-GST registered seller is not able to claim GST on expenses they incurred in providing the services, the flat rate credit scheme effectively provides the seller with a 8.5% GST credit in recognition of their inability to claim.
Impact on GST-registered sellers
GST-registered sellers would be deemed to supply services to the operators, and supplies would be deemed to be zero-rated for GST purposes. The sellers can continue to claim input GST on expenses they incur in making supplies of services through the platform.
If a GST-registered seller received a flat-rate credit, they would be required to account for the flat-rate credit in their tax return.
Impact on non-GST registered sellers
Non-GST registered sellers would not be required to register. The operators would account for GST, claim a credit under the flat-rate credit scheme on their behalf and pay the net-of-GST amount . The net-of-GST amount would take into account GST that has been charged at 15%, adjusted for the 8.5% flat rate credit.
What happens next?
We expect and are seeing digital platform providers to be reluctant to accept another person’s GST liability and you can rest assured that the cost will not fall on them.
From a common-sense perspective, if these platforms have made GST non-compliance all too easy, then this looks to be a fairly sensible approach from Inland Revenue’s point of view; deal with the person at the top and shift the workload to them. We expect the Bill to be passed into law by 31 March 2023, with changes and refinements.
Reach out to your local BDO representative to discuss how the proposed changes may affect you.
These are some of many changes proposed in a recent tax bill - Taxation (Annual Rates for 2022-23, Platform Economy and Remedial Matters) Bill (No. 2). View our previous Eyes on Tax article on proposed tax changes for cross-border workers here.