Cullen Announces New GST Regime For Financial Services Industry

by Mary Swire, Tax-News.com, Hong Kong

03 August 2004

New Zealand Revenue Minister Michael Cullen announced yesterday major changes to the country’s GST system relating to financial and imported services which are due to come in to force on January 1 next year.

According to Dr Cullen, the new legislation is designed to align more effectively the treatment of the financial services sector with that of other industries. The new measures will also introduce a reverse charge to tax for certain imports of services.

Dr Cullen explained: “From January 1, business-to-business supplies of financial services, which have been exempt from GST, will be zero-rated for GST purposes. As a result, banks and other financial institutions will be allowed to recover GST on purchases related to the supply of their services to businesses.”

He continued: “Also from January 1, the new reverse charge will tax certain imports of services, to alleviate the bias against services supplied by New Zealand residents that are subject to GST. Registered recipients of supplies of imported services will have to add GST to the price of imported services if the same services would have attracted GST if supplied in New Zealand.

The measures were initially enacted last year but their introduction has until now been left open-ended to allow time for firms to make adjustments to business systems.

The Revenue Minister stated that management, legal and accounting services and new software installations will be the principal industries affected by the new changes.

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