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Details

  • Service: Tax, Global Indirect Tax
  • Type: Regulatory update
  • Date: 11/1/2012

New Zealand: GST essentials 

Essential information regarding GST as it applies in New Zealand.


Scope and Rates

What supplies are liable to GST?


Goods and services tax (GST) is payable on taxable supplies. Taxable supplies are supplies of goods and services made in New Zealand by a registered person in the course or furtherance of a taxable activity. Supply includes all forms of supply.


What is the standard rate of GST?


The standard rate of GST is 15 percent.


Are there any reduced rates, zero rates, or exemptions?


Zero-rated supplies include:


  • exported goods and services
  • supplies of going concerns
  • certain supplies of fine metal
  • supplies of financial services to GST-registered persons making predominantly (75 percent) taxable supplies
  • supplies of land after 1 April 2011 where both the vendor and purchaser are registered for GST.

Exempt supplies include:


  • financial services that are not zero rated
  • residential rent
  • supplies of donated goods by non-profit bodies

Note: it is not possible to recover GST incurred in making exempt supplies.


A reduced rate of 9 percent applies to the provision of accommodation in hotels, motels, and similar for longer than 4 weeks.


What are the other local indirect taxes beside GST?


Other indirect taxes include:


  • customs duty
  • excise duty.

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Registration

Who is required to register for New Zealand GST?


Any person that is carrying on a taxable activity and whose current or projected annual turnover in New Zealand is NZD 60,000 or more. If a company trades below the registration threshold, it can voluntarily register for GST.


To register for GST it is necessary to apply for an Inland Revenue Department number and GST registration.


Businesses can download an IRD Number Application at:



Companies can apply for GST registration online at http://www.ird.govt.nz/online-services/service-name/services-g/online-gst-registration.html or download a GST registration form (IR 360) at http://www.ird.govt.nz/forms-guides/number/forms-300-399/ir360-form-gstregistration.html


Are there penalties for not registering or late registration?


A failure to register for GST when required to do so is an offense and the offender may be liable for a fine. Furthermore, where a person registers late, they will be liable for late payment penalties and interest on any outstanding amounts of GST due.


Is voluntary GST registration possible for an overseas company?


Yes. An overseas business making taxable supplies in New Zealand below the registration limit (which is NZD 60,000 a year) can register voluntarily in the same way as a New Zealand company. Registration means New Zealand GST must be accounted for on all taxable supplies made in New Zealand. Registration allows input tax to be claimed through the GST return system.


There are currently proposals to enable non-resident businesses to register for GST and claim back GST input tax, even though they are not making taxable supplies in New Zealand. Legislation is expected late 2012.


Are there any simplifications that could avoid the need for an overseas company to register for GST?


Non-residents who make supplies of goods and services are not required to register for GST if the supplies are made to GST-registered persons for the purposes of carrying on that person's taxable activity. Such supplies are deemed to be made outside New Zealand and are therefore not taxable supplies.


However, such non-residents can, with the agreement of the recipients, agree that supplies are made in New Zealand and accordingly register for and charge GST. This also enables the non-resident to claim GST input tax.


GST-registration is not required if the NZD 60,000 compulsory GST registration threshold is only met because of:


  • any ending of or substantial and permanent reduction in the size or scale of a taxable activity or
  • the replacement of any plant or other capital asset.

Reverse charge services: these services are covered in more detail under the International Supplies of Goods and Services section.


Does an overseas company need to appoint a fiscal representative?


No.

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GST grouping

Is GST grouping possible?


Yes, provided certain criteria are met. The main criteria are:


  • there must be 66 percent common ownership among the members of the GST group
  • group members must account for GST on the same basis (payments or invoice) and
  • group members must have the same taxable periods.

Individuals, partnerships, trusts, and companies can all join GST groups.


Can an overseas company be included in a GST group?


Yes, provided the company meets the criteria for group registration. Companies can download the GST Group Registration form (IR 374) at http://www.ird.govt.nz/forms-guides/number/forms-300-399/ir374-form-gst-groupregistration.html

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Returns

How frequently are GST returns submitted?


Returns are lodged:


  • six monthly, if the value of total taxable supplies is less than NZD 500,000 in a twelve month period or IRD approval has been granted
  • two monthly, if annual turnover is less than NZD 24 million or
  • monthly, if annual turnover (including group turnover) is greater than NZD 24 million
    Businesses can elect a monthly taxable period if their turnover is less than NZD 24 million.

Are there any other returns that need to be submitted?


No.


If a business receives a purchase invoice in foreign currency, which exchange rate should be used for GST reporting purposes? (e.g. central bank’s exchange rate applicable on the date of the invoice)


Exchange rates are published on the Inland Revenue Department (IRD) website, or a business can use the exchange rates of an IRD approved bank.

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GST recovery

Can a business recover GST if it is not registered?


No.


Does your country apply reciprocity rules for reclaims submitted by non-established businesses?


Not applicable in New Zealand. Foreign businesses that are not registered for GST in New Zealand cannot recover input GST.


Are there any items that businesses cannot recover GST on?


Businesses are not entitled to input tax credits on:


  • acquisitions that relate to making exempt supplies: where GST relates to both taxable and exempt supplies, an apportionment is needed
  • acquisitions of a private nature: where GST relates to both business and private activities, an apportionment is needed

GST input tax can be claimed in respect of entertainment expenditure and fringe benefits provided to employees. However, GST must be returned on the GST fraction of the entertainment expenditure that is non-deductible for income tax purposes.

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International Supplies of Goods and Services

How are exports of goods and services treated?


Goods


A supply of goods is zero-rated if the goods are exported by the supplier or in limited situations by the purchaser. Other supplies that are zero-rated include:


  • goods supplied to repair temporary imports or goods in transit and
  • ship and aircraft stores for use on international voyages or flights.

Services


Examples of services that are zero-rated include:


  • supplies where the recipient is not a New Zealand resident and is outside New Zealand, unless the services are directly in connection with land or moveable personal property in New Zealand
  • services physically performed outside New Zealand
  • services supplied directly in connection with land or moveable personal property outside New Zealand and
  • intellectual property rights for use outside New Zealand or to a recipient who is not a New Zealand resident and is outside New Zealand.

How are goods dealt with on importation?


Imported goods are subject to GST when they are entered for home consumption. Generally the GST is payable upon importation, unless the Deferred Payment Scheme has been entered into. This scheme enables businesses to defer the payment until the 20th day of the month following the month of importation. The payment is made by direct debit from the company’s bank account and covers all importations in the particular month.


A fact sheet on the Deferred Payment Scheme (Fact Sheet 17) can be downloaded from www.customs.govt.nz.


How are services which are brought in from abroad treated for GST purposes?


If a business intended to use the services to make less than 90 percent taxable supplies or its actual use of the services was less than 90 percent taxable it will be required to apply the reverse charge. This is intended to take away any GST advantage of buying those services from outside New Zealand.


Under the reverse charge companies are required, as the recipient, to account for GST as output tax in their GST return, and are able to recover the GST as input tax to the extent of their input tax recovery ratio.


Note that legislation reducing the taxable supplies threshold from 90 percent to 95 percent is drafted and expected to receive Royal Assent in July 2012. The new legislation will take effect from 1 April 2011.

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Invoices

Is a business required to issue tax invoices?


Generally yes, if requested by the recipient of the taxable supply.


What do businesses have to show on a tax invoice?


Tax invoices only have to be issued if requested by the recipient of the taxable supply and if the GST-inclusive value of the supply is NZD 50 or more. A tax invoice it should contain the following information:


  • the words “tax invoice” in a prominent place
  • the name and GST-registration number of the supplier
  • the name and address of the recipient
  • the date of issue of the tax invoice
  • a description of the goods and services supplied
  • the quantity or volume of the goods and services supplied
  • either:
    • ­The GST-exclusive amount, the GST and the GST-inclusive amount; or
    • The GST-inclusive amount, and a statement that it includes GST, provided the GST is three - twenty thirds of the total amount (i.e. applied at 15 percent).

Can businesses issue invoices electronically?


Yes.


Is it possible to operate self-billing?


Yes, provided Inland Revenue Department approval is obtained.


The supplier must agree that the recipient of the supply can issue a Buyer Created Tax Invoice and certain other requirements must be met.


Can a business issue GST invoices denominated in a foreign currency?


No, all amounts must be expressed in New Zealand dollars.

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Transfers of Business

Is there a relief from GST for the sale of a business as a going concern?


Yes. In certain circumstances the supply of a taxable activity as a going concern is zero-rated. Among other things, the recipient must be GST-registered, and the supplier must supply all of the goods and services necessary for the continued operation of the taxable activity. Also, the parties must agree in writing that the supply is of a going concern.

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Options to Tax

Are there any options to tax transactions?


No.

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Head Office and Branch transactions

How are transactions between head office and branch treated?


Transactions between head office and a branch office are generally not supplies and therefore there is no GST payable. An exception is where the branch chooses to register separately so that it can account for GST separately from head office. In this case the branch is treated as if it were a separate entity, so that transactions between head office and the branch are treated as though they were supplies.


A branch is also treated as a separate person from head office for the purposes of the reverse charge. In other words, supplies of services between an overseas head office and a New Zealand branch are generally subject to the reverse charge where the New Zealand branch is making less than 90 percent taxable supplies (as noted above, the threshold is expected to change to 95 percent with effect from 1 April 2011).

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Bad Debt

Are businesses able to claim relief for bad debts?


Yes, if the debt is written off as a bad debt. If the company subsequently receives payment for the supply then it will have to pay back the GST component.

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Anti-Avoidance

Is there a general anti-avoidance provision under GST law?


Yes. It applies in any case where there has been a tax avoidance arrangement entered into by the taxpayer, and the arrangement has as one of its purposes tax avoidance (so long as that purpose is more than incidental). Any arrangements caught by this provision will be void for tax purposes.

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Penalty Regime

What is the penalty and interest regime like?


Civil penalties are payable when GST is paid late or underpaid.


Late payment penalties are levied initially at a rate of 1 percent on the day after the due date for payment of the GST, a further 4 percent is then levied if the outstanding amount remains unpaid seven days after the due date. A 1 percent incremental penalty applies for every month thereafter.


Shortfall penalties range from 20 percent of the shortfall amount for not taking reasonable care, to 40 percent for gross carelessness, to 100 percent for taking an abusive tax position, to 150 percent for evasion. These percentages can be reduced for previous good behavior, or if the company makes a voluntary disclosure to the Inland Revenue Department.

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Tax authorities

Tax audits


How often do tax audits take place?


Tax audits are undertaken at the discretion of the IRD. The frequency varies. The IRD can check all business records required to be kept under the GST Act 1985 and the systems in place by the business to ensure compliance.


Are there audits done electronically in your country (e-audit)? If so, what system is in use?


Yes, but they are conducted infrequently.


Advance rulings and decisions from the tax authority


Is it possible to apply for formal or informal advance rulings from the (indirect) tax authority?


Yes, it is possible to apply for a public, private or product ruling. Additionally, indicative opinions on the GST consequences of a transaction can be obtained by writing to the IRD. Note that indicative opinions are not binding.


Are rulings and decisions issued by the tax authorities publicly available in your country?


Public and product rulings are publically available.

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Miscellaneous

In your country, are there unique specific indirect tax rules (regimes) that differ from standard indirect tax rules in other jurisdictions?


Yes, the New Zealand GST law allows the zero-rating of financial services under the Business to Business (“B2B”) regime and/or the Financier to Financier (“F2F”) regimes. Financial services are generally exempt, however, if the recipient of the services is registered for GST and makes more than 75 percent taxable supplies, the supplier can elect to participate in the B2B and/or F2F regimes and zero-rate the supply. A zero-rated supply is a taxable supply for New Zealand GST purposes and enables the supplier to recover input GST incurred (which is not possible for input GST incurred in regard to exempted financial services).


Are there indirect tax incentives available in your country (e.g. reduced rates, tax holidays)?



No.

 

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