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New Zealand To Levy GST On Online Retailers

by Mary Swire,, Hong Kong

17 November 2015

The New Zealand Government on November 16, 2015, introduced a bill containing a proposal to levy the goods and services tax (GST) on online purchases.

"It is about creating a level playing field for collecting GST and putting New Zealand businesses and jobs ahead of the interests of overseas suppliers," Revenue Minister Todd McClay said.

The Government said in a statement that these measures are an important first step in its efforts 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.

"GST should apply to all consumption that occurs in New Zealand. This is what makes our GST system fair, efficient and simple," McClay said. "The growth of online digital and overseas services means the volume of services on which GST is not collected is an increasing challenge – for the Government in terms of the GST revenue foregone, and as a matter of fairness for New Zealand suppliers of services and intangibles who must account for GST in their pricing structures."

McClay said 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 return 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," McClay 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 (USD38,972) in a 12-month period.

"The proposed changes would broadly follow the OECD's recommended guidelines, as well as the rules that apply in other jurisdictions, such as Member States of the European Union, Norway, South Korea, Japan, Switzerland and South Africa," McClay said.

The Minister said that while the measures in the bill relate to online services, the fact that GST is not charged on low-value imported goods that are below the Customs' de minimus threshold is also of concern to the Government. "The growing volume of imported goods means the amount of foregone GST is continuing to increase and raises concerns for domestic suppliers," he said.

"The New Zealand Customs Service 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," McClay said. "In the meantime, the measures proposed in the Taxation (Residential Land Withholding Tax, GST on Online Services, and Student Loans) Bill are about providing a robust, simple and easily administered set of rules for overseas suppliers of services to New Zealanders."

The proposed new rules would come into force on October 1, 2016, following enactment of the bill.

TAGS: South Africa | compliance | tax | business | interest | commerce | goods and services tax (GST) | Norway | offshore | e-commerce | New Zealand | Switzerland | tax reform | Japan | services | Withholding Tax | Europe | Africa | Tax

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