The application of New Zealand’s GST to digital and remote services sold by offshore sellers to New Zealanders (the so-called “Netflix” tax) commences on 1 October 2016. See BEPS Action 1.
The rules apply to sales by offshore sellers (which could include sellers from Singapore, Australia, Hong Kong, and elsewhere) to New Zealand private consumers.
Requirement to register and pay NZ GST
From October 1, 2016, non-resident businesses supplying ‘remote services’ (including online services) to New Zealand consumers may be required to do both of the following:
- Register for New Zealand GST.
- Charge GST on services provided to customers resident in New Zealand.
A non-resident business would need to register for GST when all of the following apply:
- It exceeds the GST threshold, i.e., its sales: (i) exceed NZ$60,000 in the last 12 months, or (ii) are expected to exceed NZ$60,000 in the next 12 months.
- Its customer is resident in New Zealand.
- It supplies a qualifying remote service. A “remote” service is where, at the time of the performance of the service, there is no necessary connection between the physical location of the customer and the place where the services are performed.
Qualifying and non-qualifying remote services
Examples of a ‘qualifying remote service’ would include:
- Supplies to digital content such as e-books, movies, TV shows, music and online newspaper subscriptions;
- Online supplies of games, apps, software and software maintenance;
- Webinars or distance learning courses;
- Insurance services;
- Gambling services;
- Website design or publishing services;
- Legal, accounting or consultancy services.
Examples of a ‘non-qualifying remote service’ would include:
- accommodation services
- hairdressing, beauty therapy and physiotherapy
- car rental services
- entry to cinema, theatre performances, sports events and museums
- gym membership
- passenger transport services
- restaurant and catering services.
Work out if your customer is resident in New Zealand
You’ll need two pieces of evidence to identify if you’re supplying services to a customer resident in New Zealand. These pieces of evidence must not contradict each other. They can include:
- the customer’s billing address;
- the internet protocol (IP) address of the customer’s device or another geolocation method;
- details of the bank account the customer uses for payment, or the billing address held by the bank;
- mobile country code of the international mobile subscriber identity stored on the subscriber identity module card;
- where the customer’s fixed land line is supplied;
- other relevant information.
New Zealand GST registered and non-GST registered customers
GST isn’t charged on supplies you’ve sold to customers that are registered for GST in New Zealand.
GST is charged to every customer unless they have:
- indicated they’re GST-registered, or
- provided you with their New Zealand GST registration number or business number.
You can choose to treat the supply as zero-rated (taxed at a rate of zero percent). This may let you claim back New Zealand GST costs incurred in making zero-rated supplies to GST-registered businesses.
Tax invoices and refunds of accidentally charged GST
When you supply a remote service to a New Zealand customer you don’t have to give them a tax invoice. Tax invoices are a standard requirement for New Zealand GST-registered businesses.
If you’ve accidentally charged GST to a GST registered customer, your customer may ask you to refund them that GST.
If the supply was NZD $1,000 or less you can choose to provide a tax invoice instead of a refund. Providing a tax invoice allows a GST-registered customer to claim back the GST in their own GST return.
Converting your currency to New Zealand dollars
You’ll need to convert your currency to New Zealand dollars when you prepare and file your GST return. You can choose to convert this at:
- the time you supplied the service
- the last day of the relevant taxable period
- a time agreed with the Commission of Inland Revenue, or
- the earlier of the:
- date you file your return for the relevant period, or
- due date for filing your return for the relevant period.
Once you’ve decided when to convert the currency you can’t change it for two years unless we agree.