New Zealand's Government has released a discussion document
inviting submissions on proposed changes to the GST treatment
of cross-border supplies of services and intangibles. The
proposed new rules, which are broadly aligned with OECD draft
guidelines on the same topic, would require offshore suppliers
to register and account for GST when they supply services and
intangibles to New Zealand-resident consumers.
The document considers both 'on-the-spot' services, which
are typically consumed at the same time and location as they
are physically performed, and 'remote' services, which are
typically consumed in a different location to where they are
physically performed. In the case of on-the-spot services, the
existing GST rules are generally considered to achieve the
right result, because services performed in New Zealand are
subject to GST, whereas services performed outside New Zealand
generally are not.
However, the existing rules mean that remote services
supplied from outside New Zealand to a recipient in New Zealand
are not subject to GST unless the existing 'reverse charge'
rule applies. That rule applies to non-business recipients only
if the value of imported services received by them exceeds
NZD60,000 ($38,000) per year, so it will not apply to the vast
majority of consumers.
The discussion document proposes a new rule which would deem
remote services supplied by a non-resident to a New Zealand
resident to be supplied in New Zealand, and therefore subject
to New Zealand GST. The rule would apply to all types of
services, not only to 'digital' services. Non-resident
suppliers would be required to register and account for GST in
respect of supplies made to New Zealand residents if the total
value of those supplies exceeds a certain threshold.
Submissions are being sought on an appropriate threshold, with
NZD10,000 and NZD60,000 being suggested as possible
A number of practical and design issues are touched upon in
the discussion document, including:
- the type of information a non-resident supplier could
rely on as a proxy for determining whether a customer is New
- whether GST would apply to business-to-business (B2B)
supplies or only business-to-consumer (B2C) supplies;
- whether non-resident suppliers would be entitled to input
- how the new rule will be enforced.
The document also foreshadows potential changes to the laws
regarding GST on low-value imported goods, including reducing
the current de minimis threshold and changing the
collection mechanism so that the foreign supplier is required
to register and account for the GST instead of the recipient.
The treatment of imported goods will be the subject of a
separate, more detailed, discussion paper later in the
Shaun Connolly (email@example.com),
Tel: +64 4 819 7545