Chapter 1 – Introduction

1.1 The Government has announced changes to the GST treatment of telecommunications services that are to apply from 1 October 2020. This issues paper provides further details of the announcement, specifically the decision to repeal most of the special rules currently in the Goods and Services Tax Act 1985 for taxing supplies of telecommunications services.

1.2 Under the current special rules for telecommunications services, whether a telecommunications service is subject to New Zealand GST is generally based on the physical location of the consumer at the time that service is initiated. This approach is out of date and inconsistent with international best practice (based on guidelines developed by the OECD) which applies GST to these types of services based on the consumer’s usual place of residence. In light of New Zealand’s new GST rules for taxing supplies of remote services, which are based on the residency of the customer, we consider that a better approach would be to align the GST treatment of telecommunications services with our rules for remote services.

1.3 Remote services, such as digital downloads and online services, are services which have no necessary connection between the place where the services are performed and the location of the recipient of the services. The GST treatment of a remote service is generally determined by the residency of the consumer.

1.4 Aligning the treatment of most telecommunications services with the treatment of remote services would result in outbound mobile roaming services received by New Zealand residents overseas being subject to GST at the standard rate of 15%. However, inbound mobile roaming services received by non-residents while in New Zealand would not be subject to GST.[1]

1.5 However, treating telecommunications services as remote services would, in some cases, not result in appropriate outcomes. Some telecommunications services require the recipient of the services to be in a specific location to receive the services. For example, a person making a call from a phone booth needs to be at the phone booth to receive the telecommunications services. For these types of telecommunications services, the location of the consumer of the services is a more appropriate proxy than the consumer’s residency for determining the place of consumption. We therefore propose that the GST treatment of this type of telecommunications services be determined by the location of the recipient of the services.

How to make a submission

1.6 Officials invite submissions on the proposed changes and points raised in this issues paper.

1.7 Send your submission to [email protected] with “GST on telecommunications services” in the subject line.

1.8 Alternatively, send your submission to:

GST on telecommunications services
C/- Deputy Commissioner, Policy and Strategy
Inland Revenue Department
PO Box 2198
Wellington 6140

1.9 The closing date for submissions is 28 June 2019.

1.10 Submissions should include a brief summary of major points and recommendations. They should also indicate whether it is acceptable for Inland Revenue and Treasury officials to contact submitters to discuss the points raised, if required.

1.11 Submissions may be the subject of a request under the Official Information Act 1982, which may result in their release. The withholding of particular submissions, or parts of submissions, on the grounds of privacy, or commercial sensitivity, or for any other reason, will be determined in accordance with that Act. Those making a submission who consider that there is any part of it that should properly be withheld under the Act should clearly indicate this.

[1] Under the current rules, inbound mobile roaming services received by non-residents while in New Zealand are potentially subject to GST. However, section 51(1)(e) means that currently most inbound roaming services are not subject to GST, as non-resident telecommunications suppliers are not required to register if their only taxable supplies are supplies of telecommunications services to non-residents.