Tuesday, 28 June 2016

New Zealand: “Netflix tax” bill passed

The bill commonly referred to as the “Netflix tax” bill was passed by the New Zealand
parliament on 13 May 2016 and will apply as from 1 October 2016. Following the passage of
the bill, the New Zealand tax authorities (IRD) issued rules and guidance on practical aspects
of implementing and complying with the new measures.
The bill broadens the scope of the goods and services tax (GST) rules to capture cross-border
supplies of services and intangibles (including digital downloads) made by offshore suppliers to
New Zealand-resident consumers (i.e. business-to-consumer supplies, but not business-tobusiness
supplies). Insurance services provided by offshore suppliers also will be caught by
the rules. As from 1 October, any offshore business providing remote and online services and
supplies of intangibles to a New Zealand private consumer will need to collect and pay GST if
the cumulative amount of supplies provided to New Zealand private consumers within a 12-
month period is expected to exceed NZD 60,000.
GST registration for overseas service suppliers will be available from 1 August 2016 and likely
will require the supplier to provide information such as its identity, contact details, country of
residence, website address, type of business, etc.
For the period from 1 October 2016 to 31 March 2017, nonresident suppliers of remote
services will have a taxable period of six months (or an optional taxable period of two months);
thereafter, GST returns will have to be filed quarterly with period ends of 30 June, 30
September, 31 December and 31 March.
The legislation requires a nonresident to determine if its customer is a New Zealand resident
and if it is a GST-registered business. Nonresidents are required to assume that a New
Zealand resident customer is not a GST- registered business unless the customer has
provided its GST registration number or New Zealand business number, or the customer has
notified the supplier that it is a GST-registered business.
It should be noted that the new rules do not address the collection of GST on the online
purchases of goods from overseas; this issue still is being considered by New Zealand
Customs and the IRD.
New Zealand is just one of a number of countries worldwide that have introduced, or are
considering the introduction of, GST or VAT on cross-border supplies, e.g. Japan, Korea,
Norway, South Africa and Switzerland already have rules to deal with aspects of this often
“untaxed” area of commerce, and Australia has proposed similar rules that would apply as
from 1 July 2017.
With less than four months until the GST rules affecting nonresident suppliers come into effect,
it is important that offshore businesses supplying remote services to consumers in New
Zealand are ready to comply.
Source: Deloitte