Following the introduction of GST on imported digital services in 2016, the New Zealand government is proposing to require offshore suppliers to collect GST on purchases of low-value goods (NZD 1,000 or less) made by New Zealand consumers who are not registered for GST from October 2019.
Technically, GST has always been payable on imports of low-value goods. However, until recently there has been an understanding that the customs service will not collect less than NZD 60 worth of GST (the amount imposed on goods worth NZD 400), as it was not considered cost-effective.
In recent years, the growing popularity of internet shopping websites has given rise to a perception among New Zealand businesses that they are being unfairly disadvantaged by the GST de minimis. This is because, due to the rise of internet shopping websites, consumers can purchase many low value items (the primary examples are books and “fast fashion” clothing) GST-free from Amazon, eBay and other online retailers.
In order to address this disparity, the Government has proposed new rules which will require offshore suppliers to collect GST on low value goods at the point of sale. GST will continue to be collected at the border for goods over NZD 1,000.
Offshore suppliers will be required to register and return GST if their total supplies in a 12-month period to New Zealand consumers are equal to or greater than NZD 60,000. This is the same threshold for GST registration that applies to New Zealand-resident businesses and non-residents supplying services into New Zealand.
The proposal also includes specific rules for marketplaces and “re-deliverers”.
When certain conditions are satisfied, where an offshore supplier sells its goods through a marketplace, the new rules deem that the marketplace has made the supply in the course or furtherance of its taxable activity. Accordingly, the marketplace will be required to register and return the GST on the supply instead of the supplier.
Electronic marketplaces will be required to register, whereas non-electronic marketplaces may register with the Commissioner’s approval.
An “electronic marketplace” must have the following attributes:
- The marketplace must allow underlying suppliers to make supplies of remote services through the marketplace to customers;
- The marketplace must be operated by electronic means, including by a website, internet portal, gateway, store, distribution platform or other similar marketplace; and
- The supplies made by the marketplace must be made by electronic means.
Payment providers have been excluded from the definition of “electronic marketplace”.
Re-deliverers are a service used by consumers when an offshore supplier does not offer shipping to New Zealand. The consumer can elect to have the goods delivered to the re-deliverer, which is an intermediary address. The re-deliverer will then deliver the goods to the New Zealand consumer for a fee. The new rules will require re-deliverers to register for and to return GST in respect of the goods that they re-deliver to a New Zealand address.
The NZD 60,000 GST registration threshold will apply to both marketplaces and re-deliverers.