The NZ remote services (RS) rules have been in force since 1 October 2016 and are regarded as a remarkable success by NZ Inland Revenue. Over 150 offshore sellers have registered and more than NZ$125 million of annual GST has been generated – the GST collected is more than 4 times the original estimates. NZ Inland Revenue deserves credit for the informative education campaign on the RS rules and efficient service when the rules first came in.
Payment and collection has been working well overall but in some cases Inland Revenue needs to consider relaxing the late payment rules for payments received 1-2 days after due date through no fault of the taxpayer. For example, a payment may be sent (by international transfer) 3-4 days before due date but may not be received by Inland Revenue for 5 days. No late payment penalties should apply as the offshore seller is genuinely trying to comply and any delay stems from the international banking system.
The RS rules only apply to B2C supplies and it is generally easy to obtain conformation from NZ businesses if they are GST-registered or not – through a direct on-boarding question, an email or via T’s & C’s indicating the recipient is GST-registered unless they advise otherwise. Unfortunately, the NZ GST rules do not allow the offshore seller to verify the GST / VAST number of the NZ customer unlike many other countries.
Some important issues are looming on the horizon:
- how to treat bundled services (supplies of different things, sometimes originating from different suppliers, by a single seller or provider);
- the overlap between the telco rules and the RS rules (there are still uncertainties in this area); and
- resolving double tax issues. This has arisen in some situations where services are physically performed offshore (with a foreign country usually imposing VAT or GST at the standard rate) and the NZ RS also applying because NZ’s zero-rating rules have been inadvertently narrowed by the RS changes. Inland Revenue Policy is looking at this area.
Low value goods threshold
Imports of goods below the current low value goods (LVG) threshold are not subject to import duty/GST. In other cases where the value of the goods is over the threshold, the importer is required to pay the duty/GST. The LVG threshold is minimum taxes of NZD 60, which equates to goods value of NZD 225-400 as some goods are not subject to duty.
NZ does not currently operate a distance selling or offshore seller model (unlike Australia from 1 July 2018). However, we expect reform in this area will consider:
- the level of the LVG threshold and whether the threshold should be reduced or eliminated;
- whether the LVG threshold should be based on goods value (considered to be more efficient to administer) or minimum taxes value (current law); and
- the most efficient way of collecting duty and GST at the border.
A Tax Working Group (TWG) was established by the new coalition Government in December 2017. The TWG is a panel of experts and will consider significant tax issues that impact New Zealand and all New Zealanders. The LVG and GST at the border will be looked at. The previous National led Government favoured a solution that would impose GST (at 15%) on the offshore seller ie. similar to the Australian model.
The upcoming PwC NZ GST Direct will discuss these significant GST issues in more detail.
For further information please contact Eugen Trombitas (PwC’s global indirect tax e-commerce leader).