GST Direct: Issue 28

GST law reform on offshore online purchases

In this issue:

The Taxation (Residential Land Withholding Tax, GST and Online Services, and Student Loans) Bill (the November Taxation Bill) was tabled on 16 November 2015. The November Taxation Bill proposes to move New Zealand in line with international best practice.

The November Taxation Bill has tabled draft law that will impose GST on digital products (e.g. music, movie and game downloads) and other services (e.g. webinars, e-learning, publishing and consultancy) purchased online from offshore sellers by New Zealand consumers. The new law will require the offshore seller to register and pay GST from 1 October 2016.

This development follows on from the August 2015 discussion document dealing with the GST treatment of digital products and services.

In relation to imported goods, the Government has indicated that various issues exist in relation to devising an effective solution for low value goods imports (covered by the current so-called $400 threshold or the minimum duties/taxes $60 concession). Progress has been made on a solution for collecting duty/GST on imported goods in the most efficient way. As discussed below, a discussion document on this issue is expected by April 2016.

The development in relation to GST on cross-border intangibles and services demonstrates that our Government and policy makers have a desire to keep our GST system current for the digital economy. This is in line with international best practice, recent OECD guidelines and developments in Australia, Europe, Japan, South Korea and South Africa. The law reform also addresses matters of sound tax policy, tax leakage (estimated to be at least $40 million per annum in relation to cross border services and growing) and fairness.

The new GST rules are a significant development and will affect many businesses and consumers. Businesses impacted by the new rules need to start planning now.

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Online GST - What's changing?

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