New GST Rules for Offshore Suppliers

The number of non-resident businesses selling products and services via the internet is increasing.

Recently introduced legislation seeks to preserve a sense of fair play for Kiwi retailers. Kiwi retailers have suffered because many New Zealanders have bought goods and services from offshore suppliers free of GST.

The “GST Offshore Supplier Registration and Remedial Matters” Bill introduces new rules. Imported goods worth less than $1,000 are now subject to GST.

Goods exceeding $1,000 will still be subject to GST being charged by NZ Customs.

GST is not currently collected on imported goods exceeding $400. Commencing 1 October 2019, offshore suppliers must register for GST when their sales exceed $60,000 in any twelve-month period. The threshold is identical to the one set for New Zealand businesses.

Buying goods on the internet from overseas suppliers will become less attractive for Kiwis. The extra fifteen percent domestic consumers need to pay will make internet shopping a little more expensive.

How will the new changes affect you?

Goods bought costing less than $1,000 GST will have GST added at the time they are purchased. GST will be added on any insurance and transport expenses.

If GST isn’t added at the time of purchase, NZ Customs will collect when the goods enter New Zealand.

Goods costing more than $1,000 are not affected by the new legislation. NZ Customs will continue to collect GST on these items.

GST will not be charged on goods costing less than $1,000 sold to New Zealand GST registered businesses. However, these businesses must provide the offshore suppliers their GST numbers to qualify for the exemption.

GST will be added to goods exceeding $1,000. New Zealand GST registered businesses would be able to claim it back via their GST returns.

Redelivery-based businesses and internet-based marketplaces may need to charge GST on sales to Kiwi consumers.

From 1 October 2019, they must add GST to all supplies made to Kiwi consumers if their sales exceed $60,000. Businesses providing online shoppers with mailboxes or offshore address facilities will be subject to these rules.

Non-resident suppliers can engage a Chartered Accountant (CA) or IRD approved Tax Agent to handle their GST.

The CA or Tax Agent would be able to register the supplier for GST. They would also be able to prepare and submit GST returns on their behalf.

Similar to domestic suppliers, overseas suppliers will be able to claim GST back on any GST they have incurred.

Redelivery businesses need to be particularly careful and should seek professional tax advice. They will need to know when GST liabilities are created.

Inland Revenue (IRD) penalties can be severe if GST if not reported or paid correctly.

Offshore suppliers must submit quarterly GST returns to IRD from 1 October 2019. IRD offers a concession in the first six months. Offshore suppliers can choose to file one six-monthly GST return for the first six months ending 31 March 2020.

The clock ticks. We recommend offshore suppliers plan well ahead of 1 October 2019 to comply with the new rules.

Domestic retailers welcome the changes and the opportunities to operate on level playing fields. The new rules mean they no longer have to watch their offshore competitors avoid adding GST to their goods and services.