A Bill recently introduced to the New Zealand (NZ) Parliament proposes widening the reach of its goods and services tax (GST) regime to capture offshore suppliers of 'remote services'. The proposals are broadly in keeping with the Organisation for Economic Co-operation and Development's guidelines and the approaches adopted (or proposed to be adopted) in several of NZ's trading partners, such as Japan and Australia.
The key aspects of the proposals include:
- Introducing a concept of 'remote services', being services where there is no necessary connection between the physical location of the customer and the place of physical performance. It will capture certain intangibles, such as digital downloads (eg music, e-books and software purchased from offshore websites) as these will be 'services' (by virtue of being excluded from the definition of 'goods'). It also will capture non-digital services, such as accountancy, legal, and consulting services when supplied remotely. The reforms are not intended to disturb the existing special provisions applicable to 'telecommunications services', but modifications will occur to the special provisions currently applicable to general insurance and to gambling services.
- Non-resident suppliers of remote services will be required to ascertain whether the customer is a NZ resident (by reference to prescribed objective proxies, such as billing address and bank details). If the customer is a NZ resident, the supplier will be required to presume that the customer is not GST-registered unless adequate proof of registration is available (eg a GST-registration number is provided).
- Non-resident suppliers will be required to register for and account for GST if they exceed the registration threshold (currently, NZ$60,000 of taxable supplies in any 12 month period). However, supplies of remote services to GST-registered customers will not be subject to GST (and, therefore, not count towards the registration threshold) unless the parties agree otherwise, in which case they will be zero-rated. This zero-rating option enables the supplier to claim back NZ GST incurred in the course of making those supplies.
- The existing reverse charge rules will be expanded to capture GST-registered customers who acquire remote services on a no-GST or zero-rated basis but who acquire or use these for non-taxable purposes.
- A simplified registration and return process is proposed for non-resident suppliers who have only a payment obligation (ie are not claiming any GST input tax credits).
- In some situations the operator of an electronic marketplace (eg an app store) will need to register for GST, as opposed to the underlying suppliers who supply remote services through that marketplace.
It is likely that some refinements to the Bill will occur as it progresses through the legislative process. However, it is unlikely that the effective date for the reforms would be pushed out. On a separate but related note, officials currently are considering the issue of collecting GST on low-value imports, with the resulting proposals due to be released for public consultation in April 2016.
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