Skip to main content
Inland Revenue

Tax Policy

Chapter 1 - Introduction

1.1 New Zealand’s goods and services tax (GST) system is based on the “destination principle”. This principle requires supplies of goods and services to be taxed in the jurisdiction where the goods and services are consumed. Almost all countries with a GST or value added tax (VAT) system apply this principle.

1.2 Accordingly, the Goods and Services Tax Act 1985 (GST Act) requires services supplied to non-residents who are outside New Zealand at the time the services are performed to be zero-rated. Zero-rating of services essentially allows suppliers to claim input tax deductions in relation to the services provided and charge GST to the consumer at a rate of zero percent.

1.3 This rule ensures that GST does not form part of the costs to overseas consumers. Further, it ensures that services are not double taxed, once by the jurisdiction in which the services are supplied and taxed a second time by the jurisdiction where the services are consumed.


1.4 Two problems have been identified with the rule that zero-rates services if they are supplied to non-residents who are off-shore.

  • The zero-rating rule requires the supplier to have knowledge of the whereabouts of the non-resident consumer during the period in which the services are supplied. However, this is not always practically possible, as the non-resident may visit New Zealand in the period on a matter that may or may not be related to the provision of services. In this situation the supplier may be unaware of the non-resident’s presence in New Zealand and mistakenly zero-rate the service.
  • The application of the residence test can result in a determination that services are zero-rated becoming incorrect. This can occur because the residence rule essentially backdates a person’s residency status.

Suggested solutions

1.5 We suggest that services to non-residents remain zero-rated even if a non-resident visits New Zealand during the period of service, as long as that visit is not in direct connection with the services performed.

1.6 We also suggest that the retrospective application of the tax residency rules be switched off in relation to the application of the zero-rating rule.

1.7 The paper seeks readers’ views on the suggested solutions, any wider implications of the solutions and how they might work in practice.

Draft interpretation statement

1.8 The two problems discussed in this paper were identified from submissions received in response to a draft Inland Revenue interpretation statement, GST on immigration services released in April 2012[1].

1.9 The draft interpretation statement considered whether the supply of immigration services can be zero-rated under section 11A(1)(k) of the GST Act when a non-resident visits New Zealand over the period during which the services are performed.

1.10 Immigration services can include many different types of services. The Immigration Advisers Licensing Act 2007 provides a wide definition of immigration advice as:

… using, or purporting to use, knowledge of or experience in immigration to advise, direct, assist, or represent another person in regard to an immigration matter relating to New Zealand, whether directly or indirectly and whether or not for gain or reward.[2]

1.11 The Act specifically excludes the provision of information that is publicly available, and other non-specific immigration advice (for more information see section 7, Immigration Advisers Licensing Act 2007). The Act requires that individuals who provide immigration advice must be licensed unless explicitly exempt under that Act.[3]

1.12 The scope of the draft interpretation statement was limited to visa application services provided to a non-resident individual. The statement concluded that immigration services may be zero-rated, provided the recipient of the supply is a non-resident and remains outside New Zealand at the time the services are performed. If the recipient comes to New Zealand over the period during which the services are performed, the entire supply of services must be standard-rated, unless it is possible to apportion the supply.

1.13 The issues raised in response to the draft interpretation statement and the solutions suggested in this paper have wider implications. Therefore, the problems and suggested solutions have been framed in general terms and are not specific to the immigration service industry. The following chapters explain the relevant zero-rating rule, the difficulties raised and the suggested solutions in detail.

Next steps

1.14 Submissions will be taken into account when officials report to the Government on recommended changes. Any resulting legislative changes are likely to be included in the next available tax bill.

How to make a submission

1.15 Submissions should be addressed to:

The GST treatment of immigration and other services
C/- Deputy Commissioner Policy and Strategy
Inland Revenue Department
P O Box 2198
Wellington 6140

1.16 Alternatively, submissions can be made by e-mailing [email protected] with “The GST treatment of immigration and other services” in the subject line.

1.17 The closing date for submissions is 5 July 2013.

1.18 Submissions should include a brief summary of major points and recommendations. They should also indicate whether the authors are happy to be contacted by officials to discuss the points raised, if required.

1.19 Submissions may be the subject of a request under the Official Information Act 1982, which may result in their publication. The withholding of particular submissions on the grounds of privacy, or for any other reason will be determined in accordance with that Act. You should make it clear if you consider any part your submission should be withheld under the Official Information Act.


1 The interpretation statement GST on immigration services is available at Note this statement has expired and is cited as a reference only.

2 Immigration Advisers Licensing Act 2007, section 7.

3 Immigration Advisers Licensing Act 2007, section 6.