New Zealand GST on low value imported goods announced
Tax Alert - May 2018
By Robyn Walker
Discussion Document Released
Non-resident retailers selling to New Zealand consumers will be required to register for and charge New Zealand GST.
Following the introduction of an offshore vendor registration for non-resident suppliers of “remote” services in 2016, it is now proposed to have a similar system for suppliers of low value goods to consumers in New Zealand from 1 October 2019. The new rules would apply to offshore suppliers who make supplies (or expect to make supplies) of goods to New Zealand end consumers of NZ$60,000 or more in a 12-month period. Electronic marketplaces and re-deliverers will also have a requirement to register and comply with the new rules.
Low value goods will be defined as imports with a customs value of NZ$400 or less (excluding GST). Tariffs and cost recovery charges will no longer apply to supplies covered by the new rules (alcohol and tobacco are excluded from these rules).
Under the current GST rules, all sales by non-residents of goods on which the total amount of GST and duty is less than NZ$60 per shipment are not subject to GST at the border and no GST is due on the sale. Due to varying rates of duty on goods, there is no single value on which GST does not apply, in some cases it is under NZ$400, and in other cases only goods under around NZ$230 are not subject to GST currently. The new rules will do away with this distinction and simply focus on whether the value of each good purchased is NZ$400 or less.
The Government Discussion Document is calling for submissions on the proposed rules, primarily focused on ensuring the proposals are workable and do not cause excessive compliance costs. Submissions on the discussion document can be made until 29 June 2018.
NZ$60,000 is equivalent to: AU$56,000; US$42,300; £30,800; €35,000, CNY268,100
NZ$400 is equivalent to: AU$374; US$282; £205; €233; CNY1787
How will a supplier know if a customer is a New Zealand consumer?
Suppliers will need to charge GST if the destination of the goods is a delivery address in New Zealand.
Offshore suppliers will not be required to return GST on supplies to New Zealand GST registered businesses, nor will they be required to provide tax invoices. There will be an optional rule allowing offshore suppliers to zero-rate supplies to New Zealand GST registered businesses. This approach would allow any GST incurred by the offshore supplier to be claimed back (for example costs of attending trade fairs in New Zealand).
Offshore suppliers will be able to presume that a New Zealand resident customer is not a GST registered business unless the customer has provided their GST registration number, New Zealand Business Number or otherwise notified the supplier of their GST registered status.
If offshore suppliers are making supplies of types of goods that are typically consumed only by businesses, it may be possible to seek agreement from Inland Revenue that it can be presumed all customers are GST-registered businesses. This rule already exists for the existing remote services rules.
When certain conditions are satisfied, an operator of an online marketplace may be required to register and return GST on supplies made through the marketplace, instead of the underlying supplier.
It is proposed that a marketplace would be required to register when customers would normally consider the marketplace to be the supplier, and this is reflected in the contractual arrangements between the parties; for example, if the marketplace authorises the charge to the customer, authorises delivery to the customer, or sets any of the terms and conditions of the transaction.
Catering to the needs of New Zealand consumers who want to purchase from retailers who won’t ship to New Zealand, there are now a range of businesses who create local delivery addresses and then ship the goods to New Zealand. There are also personal shopping services available.
These businesses will be liable to register for GST and will need to collect the 15% GST on the value of the goods as well as their services (regardless of whether this includes international transport).
The sting in the tail for customers using re-delivery services is that they are could end being double taxed with New Zealand GST being added to a supply which may have also had a domestic sales tax applied due to the local delivery address being supplied to the supplier.
Supplies above NZ$400
Where the value of an individual good exceeds NZ$400 then the current rules will continue to apply, and rather than the supplier charging GST, GST (and any applicable duty) will be collected at the New Zealand border, with the purchaser unable to collect their goods until the tax is paid.
If multiple goods are purchased in one transaction, with the total transaction value exceeding NZ$400, then GST should be charged on all individual goods costing less than NZ$400. For example, if 6 items costing NZ$200 each are purchased (NZ$1200 total), GST of NZ$180 should be charged by the offshore supplier. The purchaser will likely need to show evidence to New Zealand Customs that GST had already been charged on the consignment.
Offshore suppliers who are required to register under these rules will be able to apply for a simplified “pay-only” registration basis, or alternatively may undertake a full registration allowing them to claim back any New Zealand GST incurred in making New Zealand sales.
Offshore suppliers who are already GST registered under the remote services rules do not need to separately re-register for these new proposed rules.
GST returns and payments will be due quarterly (March, June, September, and December).
Key issues for suppliers
Suppliers who sell low value goods to consumers in New Zealand should start thinking about how the new rules could impact their business.
A range of issues will need to be considered and addressed before the rules take effect including:
- Can total sales be easily tracked by jurisdiction?
- Will the level of supplies to New Zealand end consumers exceed the registration threshold?
- What type of supplier are you and what specific rules will apply – actual supplier, online marketplace operator, or re-delivery service?
- What modifications would you need to make to your website or business processes in order to determine whether New Zealand GST should apply?
- Determining the delivery address of the customer
- Determining whether the customer is an end consumer or a GST registered business
- Determining the NZD value of the transaction
- Being able to remove any local sales tax and replacing it with 15% GST
- Including freight charges when calculating GST
- How will returned or replaced goods need to be treated for GST purposes?
- Do invoicing processes need to change
- Based on the level of expected supplies, what reporting period and compliance obligations will apply?
- Does the business wish to continue shipping to New Zealand or effectively outsource the compliance to a marketplace or re-delivery businesses?
For more information please contact a Deloitte tax specialist
May 2018 Tax Alert contents
- New Zealand GST on low value imported goods announced
- Buyer beware: ring fencing may be here
- Australia’s GST on low value goods - what you need to know
- Research & development tax incentive
- Employee Share Schemes – It’s time to act
- Are you ready to file your final FBT return?
- Post-BEPS transfer pricing legislation refresh requires taxpayer action
- How non-residents can get an IRD number without a bank account
- Have your say on taxing short-term accommodation
- Recent Developments