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Inland Revenue

Tax Policy

Chapter 1 - Introduction

1.1 This discussion document seeks submissions on proposed new rules that would apply Goods and Services Tax (GST) to cross-border services and intangibles (including e-books, music, videos, and software purchased from offshore websites). The proposed rules would require offshore suppliers to register and return GST when they supply services and intangibles to New Zealand-resident consumers.

1.2 The proposed rules are broadly aligned with the Organisation for Economic Co-operation and Development (OECD) draft guidelines on the GST treatment of cross-border services and intangibles as well as international practice.

1.3 This paper also contains some discussion on the collection of GST on low-value imported goods but does not, at this time, propose extending any registration system to offshore suppliers of low-value goods. It does, however, acknowledge the issue around the de minimis threshold under which GST does not have to be paid on imported goods and the wider issue of the cost of collecting GST on low-value imported goods.

1.4 By seeking to address the question of GST on cross-border services and intangibles, this discussion document is the first step in a review of the collection of GST on imported goods. Submissions are therefore sought on both the services and intangibles proposals, and on the collection of GST on goods. It is anticipated that a paper on goods, specifically focusing on the GST treatment of low-value imported goods will go to Ministers by October this year. This is anticipated to be followed by public consultation and further submissions will be able to be made as part of that process.


1.5 GST is not usually collected on cross-border services and intangibles purchased from offshore suppliers. When GST was introduced in 1986, New Zealand consumers purchased few services from offshore, and online digital products were not yet available. At that time, the compliance and administrative costs involved in taxing imported services potentially outweighed the benefits of taxation.

1.6 The growth of e-commerce means the volume of services and intangibles on which GST is not collected is becoming increasingly significant. This raises the question of whether the existing tax rules will remain suitable and sustainable in the future. In particular, concerns have been raised about the impact that the uneven GST treatment may have on the competitiveness of domestic providers, and on future tax revenues.

1.7 Non-collection of GST on cross-border services and intangibles is an international issue faced by countries that have a GST or Value Added Tax (VAT) system. The OECD draft guidelines focus on establishing an international set of principles for determining when countries should have the right to tax these supplies.

1.8 The draft guidelines were released for consultation on 18 December 2014 and divide services into two main groups:

  • “on-the-spot” services – where the supplier and the customer are likely to be in the same place when the services are supplied – for example, a person receiving a haircut; and
  • “remote” services – where it is not necessary for the supplier and customer to be in the same location when the services are supplied – for example, a person downloading a song from a website.

1.9 The draft guidelines suggest that, for remotely provided services and intangibles, the consumer’s usual place of residence is the predominant test for determining which country has the right to tax. They also suggest that offshore suppliers could be required to register and return the GST on remote supplies, as is the case in the European Union. The guidelines are expected to be finalised later this year.

1.10 Apart from the European Union, the offshore supplier registration model has been adopted for cross-border services and intangibles by a number of countries, including Norway, South Korea, Switzerland and South Africa. Other countries, including Japan and Australia have also announced plans to introduce the model. The countries that have implemented a system report some success in collecting the GST/VAT.

1.11 Chapter 3 discusses the collection of GST on low-value imported goods. It explains why GST is not currently collected on low-value imported goods and the issues that would be involved in addressing this.

Proposed new rules for taxing cross-border supplies of services and intangibles

  • It is proposed that services and intangibles supplied remotely by an offshore supplier to New Zealand-resident consumers will be treated as performed in New Zealand and therefore subject to GST.
  • Offshore suppliers will be required to register and return GST if their supplies of services to New Zealand-resident consumers exceed a given threshold in a 12-month period. Submissions are sought on the value of that threshold.
  • A wide definition of “services” is proposed, which includes both digital services and more traditional services.
  • In some situations, an electronic marketplace or intermediary may be required to register instead of the principal offshore supplier.
  • While GST is about taxing business-to-consumer supplies, submissions are sought on whether offshore suppliers should be required to return GST when they supply services and intangibles remotely to New Zealand GST-registered businesses (which would normally be able to claim the GST back) and whether these services would count towards the registration threshold.
  • Offshore suppliers would be able to rely on certain objective proxies in order to determine whether a customer is a New Zealand resident.
  • If supplies to New Zealand-registered businesses are excluded, New Zealand businesses would be required to identify themselves as a business by providing their IRD number to the offshore supplier when acquiring services that would otherwise be covered by the rules.
  • If business-to-business supplies are excluded, the existing reverse charge rule would apply to GST-registered businesses that receive services and intangibles from offshore suppliers when the services and intangibles relate to non-taxable activities.
  • Again, if business-to-business supplies are excluded and a person misrepresented themselves as a business to avoid being charged GST, the existing “knowledge” offences may apply and, if applicable for more egregious cases, the Commissioner of Inland Revenue would have the discretion to register the person for GST and require the GST to be paid.
  • The following three registration systems for offshore suppliers are being considered:
    • the domestic registration system;
    • a “pay only” registration system; or
    • a regional “one-stop-shop” registration system.
  • It is proposed that the new rules would be included in the next omnibus tax bill.


1.12 If you would like to make a submission on the proposals in this paper, e-mail [email protected] or write to the following address:

GST: Cross-border services, intangibles and goods
C/- Deputy Commissioner Policy and Strategy
Inland Revenue Department
P O Box 2198
Wellington 6140

1.13 Submissions on the discussion document can be made until 25 September 2015.

1.14 It would be helpful, but not essential, for submissions to 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.

1.15 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 of your submission should be withheld under the Official Information Act and the grounds you consider justify its withholding.