GST on low value imported goods
The NZ Government recently introduced new rules that will treat low value imported goods as being supplied in NZ and therefore subject to GST. The new rules apply from 1 December 2019.
New Zealand Customs Service collects import duties and GST on imported goods at the border. Prior to the new rules, GST was not collected where the amount of duty or taxes collectable is less than NZD 60, which equates to NZD 400 worth of goods if GST is the only relevant duty.
The growth in online shopping and e-commerce have led to an increase in the volume of low value goods imported into New Zealand and, in turn, increased in the volume of goods on which no GST is collected. This has led to concerns that domestic retailers are at a competitive disadvantage by having to charge GST on sales while foreign online sellers can sell low value good to New Zealand consumers without charging GST.
As a result, under the new rules non-resident suppliers will be required to register, collect, and return GST on so-called ‘distantly taxable goods’ that have a value of NZD1,000 or less and that are supplied to customers in NZ. Distantly taxable goods are defined as imported goods with an estimated customs value of NZD 1,000 or less (excluding GST). The rules will apply when the good is outside NZ at the time of supply and is delivered to a NZ address.
Non-resident suppliers will be required to register when their taxable supplies exceed the NZD 60,000 threshold. This is consistent with the threshold at which domestic suppliers are required to register for GST.
Other key aspects of the new rules include:
- Tariff and border cost recovery charges will be removed from imported goods with a value of NZD 1,000. The current processes for collecting GST and other duty at the border by Customs will continue to apply for consignments valued over NZD 1,000. Supplies of alcohol and tobacco are excluded from these rules.
- A supply of low value imported goods to a NZ GST registered customer for their own taxable activity, a business-to-business (B2B) supply, will not be subject to GST. Therefore, where a non-resident makes a B2B supply they will not have to account to Inland Revenue for GST or issue a tax invoice. A non-resident supplier must treat a NZ customer as not being registered for GST unless the customer provides confirmation of their GST registration.
- Non-resident suppliers will have a four-month transitional return covering the period 1 December 2019 to 31 March 2020. Subsequently, GST returns will be required to be filed on a quarterly basis where a non-resident’s supplies consist only of distantly taxable goods.
- Under a self-assessed test, suppliers who reasonably expect 75% or more of their supplies to New Zealand consumers to be under the NZD 1,000 threshold can also make an election to charge GST on supplies over the NZD 1,000 threshold.
- Electronic marketplaces will be required to register (instead of the underlying supplier) when distantly taxable goods are supplied through the marketplace to a New Zealand consumer and the NZD 60,000 registration threshold is exceeded. The operator of the electronic marketplace is primarily liable to remit the GST to Inland Revenue.
- Re-deliverers (those who cater to the needs of consumers who want to purchase from retailers who won’t ship to New Zealand) will be liable to register for and return GST if certain conditions are satisfied. For example, where the actual supplier of the goods is not involved in the delivery, or in the arranging or assisting in the delivery of goods to New Zealand.
- GST is charged at the standard rate of 15%.