New Zealand’s government on August 18 released a discussion paper requesting feedback on a plan to extend the goods and services tax (GST) to cross-border services and intangibles supplied to its residents, such as e-books, music, videos, and software purchased from offshore websites.
The government also said it is examining proposals to subject more imported goods to the GST by lowering the deminimis threshold or by other means.
”This document is an important first step in dealing with the increasing volume of purchases that should, under New Zealand’s tax rules, be subject to GST,” said Revenue Minister, Todd McClay.
“It is not just about the loss of revenue on these purchases, it is also about fairness. We recognize that New Zealand suppliers, including retailers, must charge GST on goods and services they supply to their customers, whereas offshore suppliers currently do not,” he said.
The discussion draft states that New Zealand’s model for taxation of cross-border services and intangibles will be consistent with OECD draft guidelines released in December 2014 under the OECD/G20 base erosion profit shifting plan. The approach is also similar to laws adopted in the EU, Norway, South Korea, Switzerland, and South Africa, the government said.
As under the OECD draft, remote services are taxed in the country where the consumer is resident. As a result, non-resident providers of remote services to New Zealand residents will need to register for GST and return GST if sales exceed a set threshold in a 12-month period. Comments are requested on what the value of the threshold should be.
On-the-spot services are taxed where they are received; so, offshore on-the-spot services will remain outside New Zealand’s GST net.
The goverment proposes to define services as anything other than physical goods or money. Also, two different proposals are suggested for collecting GST from GST-registered New Zealand businesses.
The consultation document states that New Zealand’s Customs Service has been asked to report by October on options for improving GST collection on imported goods and on lowering the level of the deminimis threshold. Following the receipt of that report, the government expects to open a consultation on the deminimis threshold.
“The fact that GST is not charged on low-value imported goods below the customs deminimis is also of concern for the government. The growing volume of imported goods means the amount of forgone GST is continuing to increase and raises concerns for domestic suppliers,” McClay explained.
The goverment has asked for comments by September 25 on both the services and intangibles proposal and on how to improve the scheme for collection of GST on imported goods.
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