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New Zealand: GST on “low-value” imported goods, details and timing

New Zealand: GST on “low-value” imported goods

More details on the proposed collection of goods and services tax (GST) on “low-value” imported goods have been released. As previously announced, this proposal features an offshore supplier registration model (similar to one in Australia) that would require offshore suppliers selling goods with a value not exceeding NZ$1,000 (increased from NZ$400 as previously proposed) to New Zealand consumers, to charge and collect GST if their total sales to New Zealand consumers exceed NZ$60,000 a year.

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Many of the key features were set forth in prior announcements, and the proposed measures are substantially similar. Read TaxNewsFlash

Among the changes from the previous announcements are measures to: 

  • Increase the threshold to NZ$1,000 (up from NZ$400) of the value of goods requiring collection of GST by offshore suppliers.
  • Allow offshore suppliers to elect to charge GST on goods having a value greater than NZ$1,000—the election would be available if 5% or less of a supplier’s total NZ sales are of goods valued over NZ$1,000. Alternatively, suppliers that do not meet this test may apply to the New Zealand Commissioner of Inland Revenue to charge GST on goods over the NZ$1,000 limit. 

One possible effect of the increased threshold is that customers buying good having a value between NZ$400 and NZ$1,000 may actually be better off than under the current system because tariffs and New Zealand customs cost recovery charges would no longer be collected on these shipments. The announcements confirm that double taxation would be avoided so that New Zealand Customs would not also collect GST on goods in a consignment over NZ$1,000 in situations when GST has already been charged by the supplier.

Offshore marketplaces and re-deliverers would remain liable for the GST obligations of the underlying supplies.

KPMG observation

One factor to consider is the implications of this proposal on offshore businesses supplying low-value goods to New Zealand consumers. Would offshore suppliers withdraw from the New Zealand market? It appears that under this proposal, there could be an increase in prices from less competition, or with consumers having to absorb the cost of using re-deliverers. The experience from Australia so far is that the transitional issues, particularly systems changes, are significant.

What’s next?

A bill containing the proposed rules is scheduled for introduction in November 2018. Under normal legislative timeframes, enactment of the final rules may not take place until June or July 2019, and this would provide a very short timeframe for offshore suppliers to make the necessary systems changes.

Key issues to look out for in the bill, or requiring attention could include:

  • Systems changes for offshore registrants
  • Pricing considerations
  • Application to different marketplace models
  • Practical measures to prevent double taxation at the border (i.e., when the offshore supplier has already charged GST at the point of sale)

 

For more information, contact a KPMG tax professional in New Zealand

John Cantin | +64 4 816 4518 | jfcatin@kpmg.co.nz

Peter Scott | +64 9 367 5852 | pcscott@kpmg.co.nz

Simon Taylor | +64 9 367 5809 | simontaylor@kpmg.co.nz

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