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New Zealand Consults On Cross-Border GST Issues

by Mary Swire,, Hong Kong

25 August 2011

A discussion document released by the New Zealand government for public consultation seeks feedback on options for addressing issues relating to goods and services tax (GST) as it applies to businesses trading with each other across borders.

Revenue Minister Peter Dunne welcomed the document, saying: “GST is a tax on consumption and should be a neutral tax for businesses, whether they are resident or non-resident. By addressing the current limitations on non-resident businesses claiming back New Zealand GST, we can help level the playing field for local businesses as they compete internationally.”

Dunne says that he is aware of cases where New Zealand’s GST represents a real cost to non-resident businesses, significantly compromising New Zealand companies’ competitiveness in global markets.

“For example, the aviation training industry provides training services to overseas airlines. As the GST is a business-to-business cost, the outcome under the proposals in the discussion document would allow the overseas entities to register and claim back the GST,” the Revenue Minister said.

The document proposes that:

  • An enhanced registration system be introduced, which would retain the existing broad ability for non-resident businesses to register for GST, but would couple this with rules allowing non-resident businesses to claim input tax in a broader range of circumstances by removing the requirement for the business to be making taxable supplies. This system is considered preferable to either an expanded zero-rating system or a direct refund model.
  • That other measures be considered to provide certainty for taxpayers and to protect the revenue base under the enhanced registration system. Some key features include that the non-resident be registered for GST or VAT (or, if not, be a registered business taxpayer) in their home jurisdiction, that there be a minimum refund threshold and that accounting for GST be on a payments or hybrid basis.
  • That supplies to non-residents of tools used solely in relation to exported products be either subject to GST (which would be deductible under the enhanced registration system) or zero-rated.

TAGS: tax | business | training | accounting | aviation | goods and services tax (GST) | legislation | New Zealand | legislation amendments | services

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