New Zealand to close GST loophole to ensure fairness
Regulatory update 2 minute read

New Zealand to close GST loophole to ensure fairness

04 June 2018

The New Zealand Government recently announced a proposal to close a loophole which waives the requirement for foreign companies to collect GST on goods sold to New Zealand customers, if the value of the goods supplied is less than NZD $400.

“Domestic businesses have long called for greater fairness in the treatment of low-value goods from offshore retailers,” Revenue and Small Business Minister Stuart Nash said in a media statement.

With this new change in place, businesses would need to collect the GST at the moment of sale, meaning that instead of the local customer paying the GST to New Zealand Customs, the burden of collection would shift to the offshore company.

As a result, all offshore companies selling goods to New Zealand companies would need to register for GST, if the value of their annual sales to New Zealand customers exceed $60,000. These companies would then need to add and calculate GST on every sales invoice, and return the amount to the Inland Revenue Department (IRD).

Though submissions on the proposal are due by 29 June 2018, there is strong support for this proposal from New Zealand businesses, and it is likely that it will be passed into law.

The proposal also sets up special rules for online marketplaces and 're-deliverers.' When an offshore supplier sells their goods through a marketplace, the marketplace needs to register and return the GST on the good instead of the supplier. Re-deliverers are commonly hired by consumers when the supplier or marketplace does not offer shipping to New Zealand. The good is shipped to an overseas hub or mailbox, which then delivers the good to New Zealand. Under the proposal, re-deliverers would need to register and return GST of the goods re-delivered to a New Zealand address.

The NZD $60,000 GST registration threshold would also apply to marketplaces and re-deliverers.

Talk to us

TMF New Zealand provides a full range of corporate services to help clients reduce risks, achieve compliance, control costs and simplify operations.

If you are a foreign business operating in New Zealand, and would like to know more about the proposed change or any aspect of doing business in New Zealand, talk to us.

Written by

Asheel Bharos

Head of Accounting & Tax

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