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NZ Lawmakers Endorse Key Tax Policy Changes

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

09 December 2015


New Zealand lawmakers approved at first reading a Bill to levy a withholding tax on offshore property speculators and apply goods and services tax to online purchases of services and intangibles from overseas suppliers.

Revenue Minister Todd McClay said the Residential Land Withholding Tax (RLWT), GST on Online Services, and Student Loans Bill is about fairness.

The Bill proposes a new withholding tax on sales of residential property by people who live overseas and go on to sell the property within two years of purchase. The proposed measure is the third part of the Government's investment property tax reforms announced as part of Budget 2015.

"This measure will act as a collection mechanism for the new bright-line test, which applies to gains from the sale of residential property purchased on or after October 1, 2015, and sold within two years. This will bring the collection of bright-line tax into line with other withholding taxes, which are applied when there is likely to be a tax owed and collection could be difficult," said McClay.

RLWT will apply when the property being sold is located in New Zealand and defined as "residential land" under the bright-line test provisions, the seller is an offshore person, bought the property on or after October 1, 2015, and has owned the property for less than two years before selling it.

"The other major part of the bill is about creating a level playing field for collecting GST and putting New Zealand businesses and jobs ahead of the interests of overseas suppliers," said Mr McClay. "The Government needs 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, which should apply to all consumption that occurs in New Zealand. This is an increasing challenge because of its exponential growth. The Government is losing revenue and it has created an unfair playing field for New Zealand retailers."

The proposed measures will 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 remit GST on these supplies.

"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 Minister said.

Non-resident suppliers will be required to register and return GST when their supplies of remote services to New Zealand residents exceed NZD60,000 (USD39,900) in a 12-month period. The proposed new rules for online GST would come into force on October 1, 2016, following enactment of the bill. The RLWT rules will be effective from July 1, 2016.

TAGS: compliance | tax | investment | business | value added tax (VAT) | property tax | law | offshore | withholding tax | New Zealand | tax reform | retail | services | Withholding Tax | business investment | Tax

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