New Zealand: New Zealand proposes new GST rules for supplies of cross-border services
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 options.
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 Zealand resident;
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 credits; and
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 year.
Shaun Connolly (email@example.com), Wellington
Tel: +64 4 819 7545