Indirect tax - New Zealand

Goods and Services Tax (GST) is the main type of indirect taxation in New Zealand.

GST is a tax on consumption which is applied on the supply of most goods and services. It is also applied to goods upon importation into New Zealand and certain services when purchased from a non-resident. Although GST is ultimately borne by the consumer by being included in the price paid, the responsibility for charging, collecting and paying it to the tax authority rests with the business making the supply ie the sale.

GST must be charged on a supply of goods or services in New Zealand by a registered person in the course or furtherance of a taxable activity carried on by that person – this is referred to as output tax. Any GST on costs incurred in generating such supplies can be claimed – this is referred to as input tax. The
difference between the output tax and the deductible input tax in each accounting period will be the amount of GST payable by the business to Inland Revenue.

Where the input tax exceeds the output tax, a refund can be claimed.

A taxable activity means any activity which is carried on continuously or regularly, whether or not for pecuniary profit, and involves or is intended to involve the supply of goods and services to another person for a consideration.

There are two rates of GST that are applied to goods and services in New Zealand; standard rate and zero rate. In addition, some goods and services are exempted from the tax. The most common exempt supplies include financial services, residential rent, penalties and interest.

Generally, businesses that make exempt supplies are unable to claim input tax on costs incurred generating those supplies, so the GST paid to suppliers is a ‘real’ cost to these businesses. However, there is the ability for businesses that supply exempt financial services to elect to zero-rate their supplies which enables a greater recovery of GST, where:

• an election is lodged with the Commissioner of Inland Revenue (this requirement to elect is expected to be removed)
• the supply is between two registered persons
• the recipient of the supplies makes at least 75% taxable supplies.

This is referred to as the provision of ‘business to business’ financial services.

Goods imported into New Zealand are subject to GST. This is imposed by New Zealand Customs at the border. The GST (plus any duties and other fees) must be paid by the importer at the time of importation in order for the goods to be released. Where the goods imported are for use in the taxable activity, the importer (if GST registered) can recover the GST. GST is charged on the value of the importation, including any customs duty, freight and insurance.
 
It is important to note the interaction between GST and customs  duty. Customs duty is levied upon the importation of certain goods into New Zealand. Unlike other indirect taxes, such as GST, once duty has been paid it is not recoverable by the importer. It therefore represents a final cost to the importing business.

Customs does not collect duty and GST where the total amount payable on any one importation is less than $1,000  This NZ$1,000 threshold is based on the customs value of the goods, excluding transport and insurance costs.

A person who either makes or intends to make taxable supplies  of goods or services in the course or furtherance of a taxable activity must register for GST if the value of its taxable supplies in New Zealand exceed $60,000 or is expected to exceed this limit within any 12 month period. A person can register on a voluntary basis even if the registration limit has not been reached.

For these purposes, a ‘person’ includes any legal entity. Therefore, once a person is registered for GST, all of their business activities will be covered by the registration – even if the nature of some of those activities are different.

Two or more persons can be registered together as a GST group if:

• they satisfy the ‘control’ test ie one of them controls each of the others, or one person controls all of them
• for companies, each of the companies is a registered person, or the total value of taxable supplies made by the companies is at least 75% of the total supplies made by the group to persons outside the group
• for companies, the members of the group have at least 66% common ownership.

A person cannot be treated as a member of more than one GST group at a time.

The main advantage of GST group registration is that, apart from a few limited exceptions, any supply of goods or services by a member of the group to another member of the group is disregarded for GST purposes. This reduces the risk of GST being accidentally omitted on supplies between separately registered, but associated persons.

However, there are some disadvantages and any decision on whether to group register should be carefully considered. For example, all GST group members (including former members) are jointly and severally liable for the GST debt of the group during the period of their membership.

Yes, although non-resident businesses are only able to register for GST in New Zealand if their taxable supplies are generated  when the time of supply occurs within New Zealand.

Time of supply arises at the earlier of an invoice being issued or payment being received.

For example, a non-resident selling goods direct to a New Zealand customer over the internet would not be able to register for GST if the goods are outside of the country when the payment is received. However, the ability for a non-resident to GST register has been expanded (further information can be found below).

Additional GST compliance requirements came into effect from 1 December 2019 applying to offshore businesses that sell goods to New Zealand customers.

Under the rules, offshore retailers are required to register for, collect and return GST at 15% to Inland Revenue where their annual supplies of ‘distantly taxable goods’ will (or are expected to) exceed NZ$60,000 or more in a 12 month period.

For the purposes of the rules ‘distantly taxable goods’ includes movable personal property:

• delivered to a place in New Zealand
• supplied by an offshore seller, electronic marketplace or redeliverer
• with a customs value of NZ$1,000 or less (excluding GST).

An offshore supplier is not required to charge GST if the customer notifies the supplier that they are GST registered or provides a GST registration number or New Zealand Business Number (NZBN).

New legislation took effect from 1 October 2016 which requires non-resident suppliers of remote services to register, charge and account for GST on supplies made to New Zealand residents. A ‘remote’ service is defined as a ‘service where, at the time of the performance of the service, there is no necessary connection between the physical location of the recipient and the place of physical performance’. GST does not need to be charged if the service is provided to a New Zealand GST – registered businesses unless the supplier and recipient agree otherwise, in which case the supply will be zero-rated. Non-resident remote service providers (including potentially marketplace operators) must file their GST returns quarterly.

From 1 April 2024 online marketplace operators advertising and selling ‘listed services’ must comply with new GST collection obligations. The supply of short-term accommodation is a listed service. 

These rules apply to all supplies of ‘accommodation services’ excluding long term residential tenancies.  This will apply regardless of the type of accommodation and could include accommodation in hotels, small cabins, standalone houses, motel rooms, or units in larger complexes.

No, this is not a requirement. However, depending upon the types of supplies being made, the logistical considerations and the volume of transactions, non-residents may engage with a local agent to facilitate the supply. Specific GST provisions  exist regarding transactions involving agents that should be considered before making any decisions.

Apart from non-resident remote service providers, GST returns may be filed monthly, bi-monthly or six monthly depending upon the level of taxable supplies in a 12 month period.

A bi-monthly return period is the default filing frequency in New Zealand. However, if a registered person makes taxable supplies of less than $500,000, they may apply to the Commissioner to return GST six-monthly. Conversely, if a registered person makes taxable supplies over $24 million in a 12 month period, they are required to return GST on a monthly basis. Anyone can choose to file monthly if they so desire.

All GST returns have to be submitted on the 28th day of the following month, together with any payment. The exceptions to this rule are where the period ends 30 November, or 31 March. Returns and payments for these periods are due 15 January and 7 May respectively. If the due date falls on a weekend or public holiday the due date is pushed back to the next business day.

Late filing penalties are imposed if GST returns are not lodged by the due date. The current penalties per late return are $250 for taxpayers registered on an invoice or hybrid basis and $50 if registered on a payments basis.

A registered person will incur late payment penalty of 1% of their underpaid GST obligation on the first day after the due date, and a 4% incremental penalty on the seventh day after the due date. There is also a 1% penalty every month the remaining tax including penalties is unpaid.

In addition, interest will be charged on the accumulating total. The current interest rate charged by Inland Revenue is 10.88%.

Not applicable.

Yes. A range of penalties can be imposed where businesses do not comply with the GST legislation.

Shortfall penalties and interest can be applied for incorrect positions taken in GST returns. These penalties are very punitive, ranging from 20% to 150% of the GST discrepancy.

If an error is identified and voluntarily disclosed to Inland Revenue this reduces or removes the shortfall penalty exposure (depending upon the nature of the offence and whether the disclosure was made pre or post audit notification).

Non-resident businesses are able to register for GST if they conduct a taxable activity in New Zealand. This requires the goods to be physically in New Zealand at the ‘time of supply’, or for services, those services must be physically performed in New Zealand. The time of supply provisions state that this event arises at the earlier of the issuing of an invoice or receipt of payment.

From 1 April 2014, non-residents businesses that are not making taxable supplies in New Zealand are able to voluntarily register for GST in order to recover the GST on costs they incur. To be eligible to register the business will have to:

• be registered for consumption tax in the jurisdiction they are tax resident
• where the jurisdiction of residence does not have a consumption tax, the person is carrying on a taxable activity, and has a level of taxable activity in a country or territory that would render them liable to be registered if they were carrying out the taxable activity in New Zealand (ie more than $60,000 of taxable supplies in a 12 month period).

For supplies between $200 to $1,000 (GST inclusive), taxable supply information must show:

• the seller’s name
• the seller’s GST registration number
• the invoice date
• a description sufficient to identify the goods or services supplied to the customer

It must also have either:

• the amount of the supply, excluding GST
• the GST and total amount payable for the supply
• if GST is included in the final price, it has to be expressed in that case.

For supplies over $1,000 (GST inclusive), the following additional information is required:

• the customer’s name and address (or other identification such as email address or trading name)

For supplies under $200 (GST inclusive), there is no requirement to issue taxable supply information although some basic information is still needed to claim input tax i.e. seller’s name, date of invoice, description of the goods or services and consideration for the supply.

An input claim can only be made if valid taxable supply information is held at the time the GST return is lodged.

No.