Indirect Tax News - October 2022

Measures proposed to bring operators of electronic marketplaces within the scope of GST

A bill currently before the New Zealand parliament would introduce a requirement for operators of electronic marketplaces to collect 15% goods and services tax (GST) on short-stay and visitor accommodation services; ride sharing, beverage and food delivery services; and closely connected services and pay the GST over to Inland Revenue. The Taxation (Annual Rates for 2022-23, Platform Economy, and Remedial Matters) Bill (No. 2) would deem such operators to be the suppliers for GST purposes. If approved, the bill would apply as from 1 April 2024 and would level the playing field with traditional suppliers of services that do charge GST. The bill also contains measures to implement the OECD’s information sharing and reporting requirements on digital platforms; the OECD released model rules in 2020 that require digital platforms to report on the income derived from the sale of goods and the offering of accommodation, transport and personal services via digital platforms and provide that information to the tax authorities.

To the extent the underlying suppliers (i.e., suppliers that provide their services via the electronic marketplace) are registered for GST purposes, they would largely be unaffected by the proposed rules. They would be deemed to supply their services at 0% to the electronic marketplace and would retain their ability to claim input GST on expenses incurred. Underlying suppliers that are not GST-registered would receive the consideration for their services net of GST from the electronic marketplace, together with a flat-rate credit equal to 8.5% of the value of the supplies to compensate for their inability to claim input GST on expenses incurred. Large commercial suppliers of accommodation services that meet certain criteria would be able to opt out of the arrangement and account for GST themselves.

As noted above, the bill also would require operators of electronic marketplaces that facilitate the rental of immovable property (including commercial, short-stay and visitor accommodation), personal services (including any time or task-based work, such as ride-sharing, food and beverage delivery, and graphic and web design services), the sale of goods and vehicle rentals to comply with reporting requirements. The operators would provide Inland Revenue with information about underlying suppliers and the income they earn from activities on their digital platforms, with the expectation that Inland Revenue would exchange the information with the relevant foreign tax authorities. It is proposed that New Zealand operators would be required to collect information on underlying suppliers as from 1 January 2024 and report the information to Inland Revenue in early 2025.

Shaneen Tie