Share with your friends

Proposed change to GST rules on telecommunications services

Telecommunications services GST


Also on


In an issues paper released today, the Government announced its intention to change the GST rules for telecommunications services from 1 October 2020. Generally, this will increase GST collected on telecommunications services.

The telecommunications services rules are some of the most complex in the GST Act. Broadly, the GST effects depend on who initiates the service, their location and who is the supplier. The complexity meant telecommunication services were excluded from the remote services rules, which applied from 1 October 2016. The remote services rules tax digital and other services provided by non-residents to New Zealand consumers.

For telecommunications services, when the recipient is a consumer, the current location rule for GST to apply will be replaced with a residency rule. If their normal residence is New Zealand, GST at 15% will apply. However, this rule is modified if the consumer has to be in a particular location to receive the telecommunications service.

Practically, this means that New Zealand residents will be subject to 15% GST on overseas roaming services. Visitors to New Zealand will continue to pay GST on telecommunications services received through use of local SIM cards or accessing Wi-Fi at internet cafes.

The proposals are said to align with the OECD’s VAT/GST guidelines and international best practice. The guidelines treat telecommunications services as remote services (can be supplied anywhere) rather than on the spot services (can only be supplied at a particular place). This is because it is said to be difficult to determine the location of the recipient.

The EU and other countries have already taken this approach. Australia continues to apply an approach which is similar to New Zealand’s current position.

Our view

As noted above, the GST telecommunications services rules are complex. While the changes are not unexpected, the principles being applied are not convincing.

Is location that difficult to determine?

By definition, roaming means that the person is not in New Zealand. If the person is in New Zealand, there should not be a roaming charge. There is a necessary connection to being outside New Zealand. Roaming services look like on the spot rather than remote services to us.

The principle

The GST result for offshore roaming does not appear right. By definition, offshore roaming must be received outside New Zealand and must therefore be consumed outside New Zealand. However, the issues paper says that is not the case. The supply is a remote service and not an on the spot service.

It seems that the issues paper accepts the logic should apply in reverse. However, it states that problems with confirming the residence of the consumer are the justification for applying GST.

A consistent answer is achieved by treating where the service is received as the place of supply.

That approach has support from the OECD guidelines. The guidelines are developed by consensus and negotiation. The result of the principle and inconsistencies suggest that the need for tax has outweighed the desirability of consistency.

However, if the approach is applied by all countries, that consistency reduces the risk of double taxation. It may therefore be difficult to make arguments based on the principle.

A consequence of the “No CGT” decision?

A practical result of the Government’s decision not to proceed with the Tax Working Group’s Capital Gains Tax (CGT) recommendation is that it now needs to consider other tax measures which raise revenue.

The “gap” in the telecommunications services GST rules has been known for a while and New Zealand has been involved in the development of the OECD guidelines.

What is different is the single issue approach to this GST change. Typically, GST changes come as a package with a mix of taxpayer friendly and unfriendly changes. There are a number of issues which have been raised with Officials to make the GST system easier to apply and comply with.

That this proposal has been advanced ahead of those GST measures, which would be more welcome, is potentially a sign of the fiscal (tax) needs of the Government. We may see more of this on 30 May when the 2019 Budget is announced.


Submissions are due 28 June 2019. We would be pleased to discuss the proposals with you and assist with submissions.

Click here to download the officials' issue paper on GST on telecommunications services.

© 2020 KPMG, a New Zealand Partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

For more detail about the structure of the KPMG global organization please visit

Connect with us


Want to do business with KPMG?


loading image Request for proposal