Following a government discussion paper, legislation has been introduced to extending GST to online purchases of services and intangibles by New Zealand consumers from overseas suppliers.
Currently, services and intangibles purchased online from overseas are not subject to GST. This puts New Zealand based suppliers of similar services at an arguable disadvantage and, from the government's perspective, leaves tax revenue 'on the table'. Under the draft bill, which reflects OECD recommendations, purchasing services or intangibles (eg ebooks, digital music) online from overseas suppliers will cost extra for the consumer to the tune of New Zealand's normal GST rate, 15%.
To facilitate this recovery of GST, overseas suppliers will need to register with the IRD and return GST at the rate of 15% on supplies made to New Zealand consumers (supplies made to New Zealand GST registered businesses will be treated as either outside the scope of New Zealand GST altogether, or subject to New Zealand GST at the rate of 0% if the supplier and recipient agree). Quite how this will work with the likes of Trade Me's overseas based sellers, or large-scale overseas online retailers like Amazon remains to be seen. You can imagine overseas suppliers will resist additional compliance formalities and costs just to serve New Zealand's tiny market. This might lead to overseas suppliers excluding New Zealand consumers from their sales or only selling through some sort of consolidated marketplace. In some cases the registration for GST may be done through a consolidated marketplace (such as eBay) as non-resident operators of electronic marketplaces will be treated as the supplier of remote services (and therefore the person liable to register for and return New Zealand GST) unless all of the following apply:
- The electronic marketplace does not authorise the charge to the recipient, or the delivery of the supply or set the terms and conditions under which the supply is made
- The documentation provided to the recipient identifies the supply as being made by the underlying supplier and not the electronic marketplace
- The underlying supplier and the operator of the marketplace have agreed in writing that the supplier is liable for New Zealand GST.
These changes to overseas supplied services and intangibles will apply from 1 October 2016.
The government's discussion paper also included some discussion on the possible imposition of GST to low value goods supplied from overseas. At this stage however, the draft bill does not include any clauses that would change the current GST treatment of low value goods supplied from overseas.
Currently if the duty/GST is less than $60 it is not required to be returned/applied (the 'de minimis' rule). Again, tax revenue may be being left on the table and the current position arguably discriminates against local suppliers of substitutable goods.