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Introduction of the ‘Amazon Tax’
1st December 2019 was the commencement date for our Government’s latest tinkering to the GST legislation – which has commonly been referred to as the ‘Amazon Tax’. Given this nickname due to the New Zealand consumers’ prolific love of internet shopping and the ease at which goods can be acquired nowadays from non-resident suppliers, the new rules target non-resident suppliers of ‘low value imported goods’ to NZ based consumers.
Historically, goods arriving at the NZ border with a value of less than $400, would not be assessed for GST by NZ Customs, and would be delivered straight to the customer. With the GST rate presently being 15%, the opportunity to essentially obtain a 15% discount by buying the same locally sold good from a non-resident supplier, certainly created an uneven playing field for the local retailers. Post a long period of grumbling from these retailers, our Government decided a new taxing regime was required, in an attempt to even the playing field again or at least ensure that the imposition of a local tax was not curbing the consumers buying decisions.
Consequently, from 1st December 2019, non-resident suppliers of low value imported goods, aptly named ‘distantly taxable goods’, to NZ based customers, may have an obligation to register for GST and start charging 15% GST on the goods supplied. A distantly taxable good is defined as one where the consideration paid by the customer (minus any GST, duty, freight or insurance costs) is less than $1,000, the goods are outside of NZ at the time of supply, the goods are supplied by a non-resident and the goods are delivered to NZ.
Goods not meeting the distantly taxable goods definition will now be referred to as ‘high value goods’, and the GST on these imports will still be assessed and collected at the border by NZ Customs. Alcoholic beverages, tobacco and tobacco products are also excluded from the new regime, the relevant excise duties and other charges also remaining under the NZ Customs umbrella for assessment and collection.
Determining whether a non-resident supplier has a GST registration obligation, depends firstly on what supplies of goods and/or services they are making to NZ customers, and then secondly, the annual value of all those supplies being made. If the answer to the second question is greater than $60,000, then the non-resident supplier should be registering for GST. A few points to note in this regard:
- Supplies to GST registered businesses (unless for a personal use) are usually excluded from the calculation (naturally because no point forcing a non-resident to charge a NZ business GST which is passed on to Inland Revenue, when that same business will then lodge a claim to recover the same amount from the NZ taxing authority);
- For the purpose of calculating the quantum of distantly taxable goods made to non-GST registered customers, amounts charged for services such as insurance and freight are now included; and,
- All supplies by the non-resident supplier to NZ consumers must be taken into account, which as well as supplies of distantly taxable goods could include:
- the total value of supplies to consumers of goods that are located in NZ at the time of supply (not including any distantly taxable goods);
- the total value of supplies to consumers of services physically performed in NZ; and,
- the total value of remote services supplied to consumers (not including any services physically performed in NZ).
The new legislation requires non-resident suppliers to presume that a customer is not a GST-registered business (and therefore charge the 15% GST) unless the customer has provided their GST registration number or NZ Business Number, or has otherwise notified the supplier of their status as a GST-registered business. Additionally, for those non-resident suppliers who actually supply their goods through online marketplaces or send the ordered goods to redeliverers (usually located in the same jurisdiction as the supplier), because the actual NZ delivery details will usually only be known by the online marketplace/redeliverer, it is those parties instead who may have the GST registration obligation instead of the non-residence supplier, if they themselves exceed the annual supply turnover threshold for compulsory registration.
Administration of the new regime, will see non-resident suppliers being required to file quarterly taxable period returns (although a one-off four month period from 1st December 2019 to 31st March 2020), with the GST return and associated payment due no later than the 28th day of the month following the end of the relevant taxable period (except the 7th May for the March quarter period end). There are also specific rules around foreign currency conversions, both for computing the value of annual supplies for determining registration, and for calculating the $NZD amounts for any particular return period.
Naturally with any new taxing regime, there are other quirks to be aware of, such as the ability for the non-resident supplier to also elect to charge GST on ‘high value goods’, so should you like more information on the new rules, or assistance with attending to any NZ compliance obligations, please do not hesitate to contact us.