New Zealand VAT, GST, and Sales Tax Guide

New Zealand

Auckland GMT +12

EY Street address:

Mail address: 2 Takutai Square Britomart P.O. Box 2146 Auckland 1010 Auckland 1140 New Zealand New Zealand

Indirect tax contacts

Paul Smith +64 274-899-866 paul.smith@nz.ey.com

Simon Dobson +64 216-828-67 simon.dobson@nz.ey.com

Saket Sharma +64 272-370-965 saket.sharma@nz.ey.com

A. At a glance

Name of the tax Goods and services tax (GST)

Local name Goods and services tax (GST)

Date introduced 1 October 1986

Trading bloc membership None

Administered by Inland Revenue Department (IRD) (http://www.ird.govt.nz) and New Zealand Customs (www.customs.govt.nz)

GST rates

Standard 15% Reduced 9% (effective rate based on GST valuation rules) Other Zero-rated (0%) and exempt

GST number format XXX-XXX-XXX (IRD number)

GST return periods

Monthly

Bimonthly

Biannually

Quarterly

Thresholds

Annual taxable turnover exceeds NZD24 million (optional for other taxable persons)

Annual taxable turnover between NZD500,000 and NZD24 million

Annual taxable turnover below NZD500,000 or 80% or more of the person’s taxable supplies for an income year occur within six months of the end of the income year

Non-established suppliers of remote services or (from 1 December 2019) low-value goods are required to file quarterly GST returns

Registration NZD60,000 per annum

Recovery of GST by non-established businesses Yes

B. Scope of the tax

GST applies to the following transactions:

• The supply of goods or services made in New Zealand by a taxable person

• The importation of goods into New Zealand, regardless of the status of the importer

• The cross-border supply of remote services and intangibles made by a non-established business to New Zealand nontaxable customers

Remote services. From 1 October 2016, the supply of “remote services” by non-established businesses to New Zealand nontaxable customers is subject to GST at the standard rate (see Section D). “Remote services” are defined as services that, at the time of the performance of the service, there is no necessary connection between the physical location of the customer and the place where the services are performed. The definition of “remote services” includes any services supplied digitally or remotely, including electronic services and remotely provided traditional services (e.g., accounting, legal and consultancy work).

Remote services supplied to GST-registered New Zealand customers will be outside the scope of New Zealand GST unless the supplier chooses to treat the supplies as zero-rated (see Section D). Specific rules apply for determining the residence and registration status of the recipient of remote services.

Low-value goods. From 1 December 2019, offshore suppliers are required to register, collect and return GST on supplies of “distantly taxable goods” to New Zealand nontaxable customers, if the value of such supplies (and any other taxable supplies) in aggregate exceeds the GST registration threshold of NZD60,000 per annum. Distantly taxable goods (also known as “low-value goods”) are defined as goods that:

• Individually have a value of NZD1,000 or less

• Are outside New Zealand at the time of supply (see Section E)

• Are supplied by a non-established business

• Are delivered to New Zealand, and the supplier makes, arranges or assists with the delivery

For low-value goods, the New Zealand Customs Service (NZCS) will not be collecting GST/duty at the border when the goods are imported. This is with the exception of fine metal, alcohol and tobacco products, which are subject to GST, excise taxes or customs duties at the border regard less of the value.

For imported goods valued more than NZD1,000 (“high-value goods”), no GST will be required to be charged by the offshore supplier. The NZCS will continue to collect duty and/or GST on the import. To minimize the compliance costs of identifying high-value goods, the offshore supplier can elect to charge GST on such goods, provided the total high-value goods are less than 25% of the total goods supplied to New Zealand customers. Once GST is charged, certain docu mentation is required to be provided to the NZCS, so that no GST would be required to be paid on these goods at the border.

New Zealand GST does not apply to supplies of low-value goods where the recipient identified themselves as a GST-registered business or provided their GST registration number or New Zealand Business Number. However, to minimize the compliance costs of identifying businessto-business (B2B) supplies, the offshore supplier may choose to charge GST on B2B supplies if such supplies are less than 50% of their total supplies to New Zealand customers.

C. Who is liable

A “taxable person” is any business entity or individual that is registered or is liable to register for GST in New Zealand.

A person is liable to register if the taxable supplies made exceed the GST registration threshold of NZD60,000 per annum. The registration threshold applies in the following ways:

• Retrospectively to taxable turnover in the current month and the preceding 11 months

• Prospectively to taxable turnover in the current month and expected turnover in the following 11 months

GST may be recovered before the incorporation of a company if certain criteria are met.

Exemption from registration. The GST law in New Zealand does not contain any provision for exemption from registration.

Voluntary registration and small businesses. A small business with taxable turnover of less than NZD60,000 a year may voluntarily apply to become a taxable person.

Group registration. Group registration is allowed for corporations or other taxable persons that are “under common control.” For these purposes, a corporation is “controlled” if one or more persons own at least 66% of either the voting power in the corporation or the corporation’s com mon market value interests.

Other taxable persons may form a group if any of the following control conditions is satisfied:

• One group member controls each of the others.

• One-person (outside the group) controls all the members of the group.

• Two or more persons carrying on a taxable activity as a partnership control the members of the group.

Certain investment funds may join a GST group with other companies or other investment funds that meet the eligibility criteria. A listed portfolio investment entity can also become part of a group for GST purposes.

Non-established businesses registered under the new “enhanced” registration system (i.e., nonestablished GST business claimant registration) for non-established entities cannot group with resident companies.

A group must appoint a representative member. Group members making supplies outside the group must issue tax invoices if requested to do so. The representative group member must account for GST with respect to all group members’ taxable activities and file the group’s GST returns. Group members must adopt the same filing frequency and accounting basis for GST purposes.

All members of a GST group are jointly and severally liable for GST debts and penalties.

Transactions between group members are disregarded for GST purposes. This measure applies on the condition that the supply is made to a group member that would have been entitled to input tax recovery if the supplier had not been a member of the group.

If a taxable person’s business is organized in branches or divisions, it may register the divisions or branches separately for GST purposes. To register separately, a branch or division must main tain its own accounting system and it must either be in a separate location or carry out different activities from the rest of the legal entity. A branch or division that is separately registered must obtain its own GST registration number and complete a separate GST return. GST is charged on supplies made between branches and divisions that are registered separately and the rest of the legal entity.

There is no minimum time period required for the duration of a GST group.

Non-established businesses. A “non-established business” is a business that has no fixed establishment in New Zealand. A foreign or non-established business must register for GST if it makes

taxable supplies in New Zealand that exceed NZD60,000 in any 12-month period. A non-estab lished business may also register for GST voluntarily if its supplies are below the annual registra tion threshold.

A non-established business that does not make taxable supplies in New Zealand may register for GST, in order to recover GST incurred in New Zealand, under the non-established GST business claimant registration regime (see Section G). Prior to 30 March 2017, GST imposed by the NZCS cannot be recovered by a business registered under this regime. However, with effect from 30 March 2017, legislation has been amended to enable the non-established suppliers registered under this regime to recover the GST by entering into an appropriate arrangement with the recipient of the goods, who is deemed to have incurred the import GST and accordingly may be entitled to recover the GST from the Inland Revenue Department (IRD).

Tax representatives. A non-established business is not required to appoint a New Zealand resi dent tax representative in order to register for GST.

Agents. When a taxable person makes a supply to a customer using an agent, the customer and taxable person (or principal) are considered to be dealing directly with each other for GST pur poses.

A supplier and its agent may agree in writing to opt out of this rule so that a supply by the prin cipal to the customer using an agent is treated as two supplies: one from the principal to the agent and the other from the agent to the customer. A purchaser and its agent may also agree in writing to allow agents and principals to opt out of the agency rules for a supply made to the principal. Opting out enables the parties to account for GST as though the supply was two supplies: between the supplier and agent, and between the agent and principal.

Reverse charge. A compulsory reverse-charge regime applies if all of the following circum stances exist:

• A supply of services is made by a non-established business to a resident.

• The supply would be taxable if made in New Zealand

• The recipient of the supply is registered (or required to be registered) for GST

• The recipient makes taxable supplies that are less than 95% of its overall supplies

• The recipient of the supply meets one of the following conditions

At the time of acquisition, it estimates that the percentage of intended taxable use of the services is less than 95%

It determines that the percentage of actual taxable use is less than 95%

The reverse charge is 15% of the consideration for the supply. An input tax credit may be claimed with respect to the reverse charge to the extent that the service was used or available for use in making taxable supplies.

Domestic reverse charge. There is no domestic reverse charge in New Zealand.

Digital economy. Non-established businesses that supply “remote services” and “low-value goods” must register and account for GST in New Zealand if the annual value of those goods and ser vices supplied to nontaxable New Zealand consumers (i.e., business-to-consumer [B2C] sup plies) exceeds NZD60,000 (approximately EUR37,000 or USD43,000). For further details, see the subsection Remote Services above under Section B.

Online marketplaces and platforms. Suppliers who only supply remote services and/or low-value goods to New Zealand customers through an “electronic marketplace” operated by a non-estab lished business will generally not be required to register for GST in respect of the supplies made through the marketplace. Instead, the non-established operator of the marketplace is generally liable to register and return GST on behalf of its underlying suppliers, unless the supplier agrees

to the GST obligation, the operator does not authorize the charge or delivery of the goods or services and various steps are taken to ensure the operator is not seen to be the supplier.

A non-established operator of a nonelectronic marketplace through which remote services are supplied to New Zealand customers can also register and return GST on behalf of its underlying suppliers if it obtains approval from the IRD to do so.

A re-deliverer of low-value goods who arranges or assists a non-GST-registered New Zealand customer in the purchase of goods outside of New Zealand could be held responsible for collect ing GST on the low-value goods if neither the supplier nor an operator of a marketplace delivers or assists in delivering the goods to New Zealand.

Registration procedures. Before registering for GST, the taxable person must already have an IRD number. If not, the taxable person can apply for an IRD number and register for GST at the same time. IRD number and GST registration can be undertaken by submitting a hard copy form or by registering online. Registration online is done instantly, whereas registration by way of a hard copy form can take several weeks. The registration can be submitted either by the taxable person or by a tax agent of the taxable person. Online registration can be completed at www.ird.govt.nz.

The registration process for non-established businesses who only make supplies of remote ser vices or low-value goods has been simplified, and the registration form can be submitted by email, by posting to the IRD or by registering online.

Generally, the following information and documentation will be required for an IRD number and GST registration:

• General business information, e.g., country of residence, registered name, address, business industry classification (BIC) code, certificate of incorporation or taxable person identification number, business start date, etc.

• Full name and address of all directors and shareholders (if less than five) and supporting docu mentation (i.e., passport page showing photo ID and name and proof of residential address) for at least one director.

• A fully functional New Zealand bank account number and supporting documentation (not required for a non-established business).

• The business’ turnover in the last 12 months or expected turnover in the next 12 months.

• Choice of GST filing frequency and accounting basis.

Deregistration. A taxable person that ceases to make taxable supplies must notify the IRD within 21 days after ceasing operations. If the IRD is satisfied that the taxable person’s operations are not expected to recommence within 12 months, they may cancel the taxable person’s GST regis tration. The taxable person is required to file a final return on deregistration and the GST on any remaining assets or liabilities in New Zealand at the date of deregistration needs to be accounted for.

A taxable person may deregister voluntarily if it can satisfactorily prove to the IRD that its tax able turnover in the following 12 months is expected to be less than NZD60,000.

Changes to GST registration details. Taxable persons should notify the tax authorities about changes in their GST registration details within 21 days of the change. This may be done by submitting a hard copy form or by updating the details in the IRD online portal (i.e., myIR).

D. Rates

The term “taxable supplies” refers to supplies of goods and services that are liable to GST, includ ing the zero-rate.

The GST rates are:

• Standard rate: 15%

• Reduced rate: 9%

• Zero-rate: 0%

The standard rate of GST applies to all supplies of goods or services unless a specific measure provides for a reduced rate, the zero-rate or an exemption.

Examples of goods and services taxable at 0%

• Sale of a business as a going concern

• Exported goods

• Certain exported services (excluding exported services that are acquired to enable or assist a change in the physical or legal status of land located in New Zealand)

• Services performed outside New Zealand

• First sales of refined precious metals for investment purposes

• Supplies of financial services to businesses that make taxable supplies in excess of 75% of total supplies where the supplier has elected to do so

• Certain transactions involving emissions units

• Exported secondhand goods if the recipient gives the supplier an undertaking in writing that the goods will not be reimported into New Zealand

• Certain supplies of which land is a component by GST-registered vendors to taxable persons

• Supplies of remote services made by non-established businesses to GST-registered New Zealand customers, where the supplier chooses to zero-rate

Some specific supplies have an effective rate of 9% through the GST valuation rules.

Examples of goods and services taxable at 9%

• Supplies of accommodation and other domestic goods and services in a rest home where nurs ing care and other services are provided

• Supplies of long-term accommodation in a hotel or motel

The term “exempt supplies” refers to supplies of goods and services that are not liable to GST and that do not qualify for input tax deduction.

Examples of exempt supplies of goods and services

• Financial services (although some qualify for the zero rate)

• Sales of donated goods and/or services by nonprofit organizations

• Certain real estate transactions

• Supply of fine metals

Option to tax for exempt supplies. In some cases, suppliers of financial leases can elect to treat their interest income as taxable supplies instead of exempt supplies.

E. Time of supply

The time when GST becomes due is called the “time of supply” or “tax point.” Under the gen eral rule, a supply takes place when an invoice is issued or when payment is received by the supplier, whichever is earlier.

Taxable persons may opt to account for GST using the invoice basis (most common), the pay ments basis or the hybrid basis. These methods are described below:

• Under the invoice basis of accounting, a taxable person must account for GST when an invoice is issued or when payment is received, whichever is earlier. Input tax is recoverable on the basis of tax invoices received (see Section F).

• A taxable person may use the payments basis of accounting if the total value of its taxable sup plies in the preceding 12 months did not exceed NZD2 million or if its turnover is not expected to exceed this figure in the following 12 months. Under the payments basis of accounting, a taxable person must account for GST on the basis of payments received (except for a supply for which the consideration is more than NZD225,000 and a supply that is not a short-term agreement for the sale and purchase of property or services). Input tax is recoverable on the basis of invoices paid (see Section F). Non-established businesses registered under the GST business claimant registration regime must account for GST on the payments basis.

• Under the hybrid basis of accounting, a taxable person accounts for GST on sales and income when an invoice is issued or when a payment is received, whichever is earlier. Input tax is recoverable on the basis of invoices paid (see Section F). GST on expenses and purchases is accounted for when a payment is made, and output tax is returned on the basis of invoices paid (see Section F).

• Where the supplier and recipient are associated entities, the time of supply is the earliest of the issuing of an invoice, the receipt of payment by the supplier or the making available of the goods, removal of movable goods or performance of the services.

Deposits and prepayments. Where a binding contract exists, the receipt of a deposit applied to the benefit of the vendor may trigger the time of supply. This is regardless of whether at the time of the receipt the contract is conditional or unconditional. Where a deposit is paid to a person as a stakeholder, there will have been no receipt by the supplier and the time of supply will not be triggered. For nonrefundable deposits, if the facts show that the supplier is entitled to the depos it from the moment of payment, then the time of supply will have been triggered. For refundable deposits, if the facts show that the deposit is paid to a stakeholder and cannot be applied to the supplier’s benefit until the happening of a specific event, then the time of supply will not be trig gered until the event has occurred and the stakeholder obligations are at an end.

If a deposit is received but the supply does not take place (for example because the contract has been canceled), the vendor is still required to account for GST. However, the GST effect of enter ing into the contract will be reversed in the period in which the agreement is canceled.

The treatment of deposits does not depend on whether the supply is in relation to goods or ser vices.

Continuous supplies of services. Under the following instances, each periodic payment is deemed to be a separate supply and the time of supply is deemed to take place whenever any periodic payment becomes due, is received, or any invoice relating only to that payment is issued, which ever is the earlier:

• Goods that are supplied progressively or periodically pursuant to any agreement or enactment that provides for the consideration for that supply to be paid in installments or periodically and in relation to the periodic or progressive supply of those goods

• Goods and services supplied directly in the construction, major reconstruction, manufacture or extension of a building or an engineering work and are supplied pursuant to any agreement or enactment that provides for the consideration for that supply to become due and payable in installments or periodically in relation to the progressive nature of that construction, manufacture or extension

Goods sent on approval for sale or return. There are no special time of supply rules in New Zealand for supplies of goods sent on approval for sale or return. As such, the normal time of supply rules apply (as outlined above).

Reverse-charge services. The normal time of supply rules apply for the supply of reverse-charge services (i.e., the earlier of when an invoice is issued or any payment received) with an exception where the supplier and recipient are associated persons.

Where the supplier and the recipient are associated parties, the time of supply is generally the earlier of the following:

• The end of the taxable period that includes the date that is two months after the recipient’s bal ance date for the year in which the service was performed

• When an invoice is issued

• When any payment is received

Leased assets. Where goods are supplied under an agreement to hire (which generally includes leases where title to the assets is not expected to pass to the lessee) or where services are supplied under any agreement or enactment that provides for periodic payments, the time of supply is deemed to take place when a payment becomes due or is received, whichever is the earlier.

Where goods and services are supplied under a hire purchase agreement (which generally includes leases where there is an option to purchase the leased assets), the time of supply is deemed to take place at the time the agreement is entered into.

Imported goods. There are no special time of supply rules in New Zealand for supplies of import ed goods. As such, the general time of supply rules apply (as outlined above).

F. Recovery of GST by taxable persons

A taxable person may recover input tax, which is GST charged on goods and services supplied to it for business purposes. A taxable person generally recovers input tax by deducting it from output tax, which is GST charged on supplies made. Input tax includes GST charged on goods and services supplied in New Zealand and GST paid on imports.

Non-established businesses may recover GST costs without making taxable supplies in New Zealand under the GST business claimant registration regime (see Sections C and G).

A valid tax invoice or customs document must generally accompany a claim for input tax for a supply greater than NZD50 (including GST).

The time limit for a taxable person to reclaim input tax in New Zealand is two years. A taxable person is effectively restricted from claiming input tax credits with respect to supplies that are greater than two years old except in certain circumstances. The exceptions under which a taxable person can claim input tax greater than two years include where the taxable person is unable to obtain a tax invoice, there is a dispute over the amount of the payment for the supply and where the failure to claim the input tax in an earlier period was a result of a clear mistake or simple oversight.

Nondeductible input tax. Input tax may not be recovered on purchases of goods and services that are not used for business purposes (for example, goods acquired for private use by an entrepreneur).

Examples of items for which input tax is nondeductible

• Nonbusiness expenditure

• 50% of business entertainment expenses

Examples of items for which input tax is deductible (if related to a taxable business use)

• Purchase, lease, hire, maintenance and fuel for cars, vans and trucks

• Conferences and seminars

• Advertising

• Accommodation

• Mobile phones

• Business gifts

• Travel expenses

• Capital raising costs

Partial exemption. A taxable person may recover GST, to the extent that the acquired goods or services are used for making taxable supplies. This input tax regime replaces the “principal pur pose” test described below with an apportionment test. Under the new regime, a taxable person apportions GST incurred on the acquisition of goods and services and claims an input tax deduction for goods or services that are used for making taxable supplies.

To determine the extent that goods or services are used for making taxable supplies, a taxable person must estimate how it intends to use the goods or services and choose a determination method that provides a fair and reasonable result. The taxable person then uses the estimated intended taxable use of the goods and services to determine the proportion of the input tax that corresponds to the estimated intended taxable use.

A taxable person is not required to apportion input tax if it makes both taxable and exempt sup plies and has reasonable grounds to believe that the total value of its exempt supplies is no more than the lesser of NZD90,000 or 5% of the revenue from all taxable and exempt supplies for the period beginning at least 12 months from acquisition of the goods and services and ending on the person’s balance date.

Taxable persons may be required to make further adjustments if the actual taxable use of an asset is different from its intended taxable use.

Approval from the IRD is not required to use the partial exemption standard method in New Zealand. Special methods are allowed in New Zealand. Taxable persons who principally make supplies of financial services are required to seek agreement from the IRD to use an alternative method of apportionment (i.e., a special method).

Taxable persons may obtain approval from the IRD to use an alternative method of apportion ment and adjustment that is “fair and reasonable” if the taxable person is making supplies exceed ing NZD24 million in a 12-month period, or the taxable person is associated with a specific industry.

A special rule has been introduced for situations in which land is used concurrently for a taxable purpose and a nontaxable purpose, such as when land is simultaneously advertised for sale (taxable use) and rented out as a dwelling (nontaxable use). The new rule requires a taxable person to calculate the percentage that the land is used for making taxable supplies by using the follow ing formula:

Consideration for taxable supply

Total consideration for supply x 100

In the above formula, “consideration for taxable supply” is the amount received on a disposal of land in the adjustment period or the market value of the land at the time of making the adjust ment. “Total consideration for supply” is the consideration for taxable supply, as described in the preceding sentence, plus the total exempt rental income payable since the acquisition of the land.

Special apportionment rules apply where certain assets (land, boats and planes) are used for both income-earning and private activities (i.e., “mixed-use assets”). If an asset is not used for at least 62 days per income year, expenditure relating to such assets is to be apportioned according to the following formula:

GST amount * (income days/(income days + private days))

In the formula, days can be substituted for a comparable unit, such as flying hours for planes or nights for accommodation. Some expenditure is fully deductible, such as costs incurred to repair damage caused when the asset is used to earn income, expenditure solely relating to the use of

the asset for deriving income that derives no personal benefit (such as advertising) and expendi ture incurred to meet regulatory requirements.

If goods and services were acquired principally for making taxable supplies but were also used for making exempt supplies, an output tax adjustment was required to the extent that the goods and services were used for making exempt supplies.

If goods and services were acquired principally for making exempt supplies or for nonbusiness purposes, an input tax adjustment was required to the extent that the goods and services were used for making taxable supplies. Some transitional rules relate to specific aspects of the chang es are discussed above.

Capital goods. Capital goods are items of capital expenditure that are used in a business over several years. Input tax is not recoverable to the extent that the capital goods are purchased by a business for private use. Similarly input tax is not recoverable to the extent that capital goods are used to make exempt supplies (assuming the value of the exempt supplies is more than NZD90,000 or 5% of the total supplies made by the taxable person).

For land, the actual taxable use must be determined by reference to the percentage taxable use of the asset over the entire period from the purchase date to the end of the adjustment period. The resulting taxable use percentage is effectively the weighted average of the annual taxable use percentages calculated over the ownership period. Capital goods are subject to annual wash-up adjustments as stated above. The number of GST adjustments required is determined by refer ence to the value of the capital goods.

Refunds. If the amount of input tax recoverable in a period exceeds the amount of output tax payable, a refund may be claimed. GST refunds are generally made within 15 working days after the IRD receives a correct return unless the IRD investigates the return and determines that the taxable person has not complied with its GST obligations.

However, a refund can be withheld for up to 90 days for non-established businesses registered under the GST business claimant registration regime.

Pre-registration costs. Costs incurred prior to registration may be claimed, provided they were legally incurred by the company or person seeking to recover them, and they relate to the taxable activity of that company or person. Preincorporation expenditure cannot be claimed where the goods or services were acquired more than six months prior to the date of incorporation of the company. Input tax on pre-registration costs is claimable in the GST return period covering the income tax balance date. This includes goods or services acquired prior to the incorporation of a company, where the costs were incurred by a person who became a member, officer or employee of the company and was fully reimbursed for the costs, and where the goods and services were acquired for the purpose of a taxable activity to be carried out by the company and have only been used for that purpose.

Bad debts. The GST on bad debts may be recoverable by including the amount as a credit adjustment in the GST return, provided the debts are both bad and written off. If all or part of the bad debts is later recovered, the GST on the bad debts recovered must be returned to the IRD by including the amount as a debit adjustment in the GST return.

Noneconomic activities. A registered nonprofit body resident in New Zealand may recover input tax on expenses to the extent that the acquired goods and services are not used for making exempt supplies.

G. Recovery of GST by non-established businesses

A non-established business that does not make taxable supplies in New Zealand may register for GST to recover GST incurred in New Zealand under the non-established GST business claimant registration regime. The following rules will govern the scheme:

• The non-established business must be registered for GST or VAT in its own country or be car rying on a taxable activity and making a sufficient level of supplies that would render them liable to be registered under the New Zealand legislations

• The GST refund resulting from the first GST return must be more than NZD500 or the nonestablished business is likely to be liable for GST levied by the NZCS in relation to the impor tation of goods (note that the NZD500 threshold does not apply here)

• The GST input tax credits only arise when the non-established business has paid for the expen diture

• The non-established business cannot form a New Zealand GST group with New Zealand resident entities unless the nonresident is registering for GST under the ordinary rules

• The non-established business must not be making supplies of services that are likely to be received by a person in New Zealand who is not registered for GST or is registered but is not receiving the services in the course of making taxable or exempt supplies

• The tax authority will not be legally obliged to refund the GST until 90 days after the GST return has been lodged

H. Invoicing

GST invoices. A New Zealand taxable person must generally provide a tax invoice for all taxable supplies made to other taxable persons within 28 days after a request for the invoice. A tax invoice is generally required to support a claim for deduction of input tax for items that cost more than NZD50 (including GST).

Non-established businesses that supply only remote services are not required to issue tax invoic es to New Zealand customers. However, they can choose to issue an invoice where GST was incorrectly charged on a supply made to a GST-registered person and both of the following conditions are met:

• The consideration for the supply was less than NZD1,000 (by reference to the foreign currency amount converted into NZD at the time of supply)

• The customer has informed the supplier that it is GST-registered or has provided its GST/IRD registration number or New Zealand business number

Offshore suppliers of low-value goods are not required to issue tax invoices to New Zealand customers. However, the supplier can choose to issue a tax invoice if the NZ customer is regis tered for GST and the supplier elects to treat their B2B supplies as being subject to GST (see Section B above). Alternatively, a tax invoice may be issued where GST is charged on a B2B supply of low-value goods by mistake. This allows the customer to submit a GST claim to the IRD for the GST they incorrectly paid to the supplier.

Offshore suppliers are required to issue receipts to the customers for the supplies of low-value goods if GST is charged on the supply. Receipts must be issued within 10 working days after a request for the receipt. The customer can then provide the receipt to the NZCS as evidence that GST was charged at the point of sale, so that the NZCS does not collect GST again when the goods are imported into New Zealand.

On 8 September 2021, the New Zealand Government introduced the latest omnibus tax bill into Parliament. The bill includes proposed changes to GST tax invoice requirements. The proposed changes seek to modernize the GST rules and provide for information in relation to supplies to be created and retained in business’ record-keeping systems, removing the current requirements to create and maintain prescribed documents (such as tax invoices and credit notes). The focus

of the changes is on providing flexibility for business in how GST information related to supplies is communicated to customers. Importantly, the changes would remove the need for a tax invoice to be held to support input tax recovery, with entitlement to input tax recovery instead being supported by business records showing the GST that has been borne on the supplies. At the time of preparing this chapter, the proposed changes have not been passed. If they are passed, they will likely apply from around April 2022 (date the bill passes)

Credit notes. A credit note may be used to reduce the GST charged and reclaimed on a supply if the value originally charged was incorrect. A credit note must indicate the reason why it was issued and must refer to both the GST originally charged and the corrected amount. The time limit for issuing a credit note for a supply made in an earlier period is generally four years from the end of the taxable period in which the supply was made.

Electronic invoicing. Electronic invoicing is allowed in New Zealand but is not mandatory. Where the originals are in hard copy form, the electronic recording of the documents is accepted pro vided that the soft copy, if printed, is identical in format and all other aspects to the original documents. Further, the information must be readily ascertainable and must meet the require ments of the Electronic Transactions Act 2002.

Simplified GST invoices. A simplified GST invoice is allowed when the supply is less than NZD1,000. A simplified invoice means the name and address of the recipient and the quantity or volume of the goods and services supplied are not required to be shown on the invoice, but the invoice should include the consideration for the supply and a statement that GST is charged.

Self-billing. A buyer created tax invoice (BCTI) can be issued by a recipient of a taxable supply. A BCTI is required to include the same information as a standard tax invoice. In addition, the supplier and the recipient must agree that the supplier will not issue a tax invoice for the same supply. The recipient must obtain approval from the IRD to issue the buyer created tax invoice. If approval is granted, the invoice must contain the words “buyer created tax invoice – IRD approved” in a prominent place, and the document must be provided to the supplier, with a copy to be retained by the recipient.

Proof of exports. In order to apply zero-rating to a supply of exported goods, the following docu ments are accepted by the NZCS as proof of export:

• Delivery evidence (e.g., bill of lading showing export by sea, or air waybill for export by air)

• Packing list or delivery note showing overseas delivery address

• Insurance documents

• Purchase order showing overseas delivery address

There is no specific wording requirement for an invoice issued relating to an exported sale.

Foreign currency invoices. Invoices must be issued in the domestic currency, which is the New Zealand dollars (NZD). If a tax invoice is issued in foreign currency, the values used for GST purposes must be converted to NZD based on the exchange rate in effect at the time of supply. Exchange rates published by an approved bank (all registered banks in New Zealand are approved) or an approved bureau de change (e.g., American Express and Travelex Australasia Group, which includes Thomas Cook) are acceptable by the IRD.

Supplies to nontaxable persons. There are no specific rules in relation to the invoices issued for supplies made by taxable persons to private consumers. No tax invoices are required to be issued by a supplier of remote services, or if the value of the supply is less than NZD50. In other cases, the general tax invoicing requirements apply.

Records. Records include books of account recording receipts, payments, income or expenditure and include vouchers, bank statements, invoices, tax invoices, credit notes, debit notes, receipts and such other documents as are necessary to verify the entries in any such books of account.

Record retention period. Records must be kept for at least seven years after the end of the tax able period to which they relate.

Electronic archiving. Records may be kept in a manual or electronic format. However, taxable persons should ensure the records being kept are sufficient to enable ready ascertainment by Inland Revenue of the taxable person’s liability to tax.

Records must be kept in English or te reo Maori, unless agreed otherwise with the IRD. It is also a requirement to store the records in New Zealand unless approval is obtained from the IRD for offshore storage. Nevertheless, suppliers of remote services or low-value goods can store records in a language other than English or te reo Maori and outside of New Zealand without obtaining an approval from the IRD.

I. Returns and payment

Periodic returns. GST returns are generally submitted monthly or bimonthly. Two cycles of bimonth ly returns are provided to stagger submission dates. A taxable person may request a change in its GST return cycle to ease administration.

A taxable person whose taxable turnover exceeds NZD24 million in a 12-month period must submit GST returns monthly. Other taxable persons may opt to submit GST returns monthly if they wish to receive regular repayments of GST or if they find it easier to account for GST on a monthly basis.

A taxable person whose annual taxable turnover does not exceed NZD500,000 may submit GST returns on a six-monthly basis. A person may also apply for a six-monthly filing frequency even though their taxable supplies exceed the NZD500,000 threshold, if 80% or more of their taxable supplies in an income year are made within a six-month period that ends at any day within the last month of the person’s income year, and the person had not had a six-monthly filing fre quency under this criterion in the 24-month period before the application.

A non-established business who only makes supplies of remote services and/or low-value goods in New Zealand (and whose taxable supplies exceed the registration threshold of NZD60,000) must submit GST returns on a quarterly basis.

GST return periods generally end on the last day of the month. However, taxable persons may request different periods to align with their accounting records. GST return due dates generally fall on the 28th day of the month following the end of the return period, except for the periods ending 30 November and 31 March. The due dates for these periods are 15 January and 7 May, respectively. The GST return form indicates the due date for each return.

Periodic payments. GST payment due dates fall on the same day as the periodic GST return filing due dates as detailed above.

GST payments can be made in several ways, including the use of internet banking, debit or credit card, setting up direct debit payments in myIR or money transfer from overseas. Making payments electronically is the recommended approach by the IRD, as it is the most accurate and reliable method. The following references must be included when making an electronic payment to the IRD:

• The taxable person’s IRD number

• An account type (e.g., GST)

• The tax period the payment relates to (ddmmyyyy)

Electronic filing. Electronic filing is allowed in New Zealand but not mandatory. There are how ever proposals to introduce a requirement for electronic filing of GST returns for taxable per sons with turnover above a certain threshold. The threshold has not yet been determined and will

be set by Order in Council following appropriate consultation. Retention of electronic records is subject to special requirements.

Payments on account. For taxable persons that are provisional taxable persons, provisional tax installment dates should coincide with the GST return due dates. A provisional taxable person is a person that pays its anticipated yearly income tax liability in installments during the income year.

Special schemes. Non-established suppliers of remote services or low-value goods. Non-established suppliers of remote services or low-value goods are subject to special filing frequencies with quarterly filing as detailed above.

Annual returns. Annual returns are not required in New Zealand.

Supplementary filings. No supplementary filings are required in New Zealand.

Correcting errors in previous returns. If an error has been made in a GST return that has already been filed, the taxable person should notify the IRD about the error before being audited to pre vent or reduce the penalties being imposed. The taxable person will be liable to pay for the tax shortfall, the use of money interest on the tax shortfall (if over NZD100) and the shortfall pen alty (see Section J). An error can be corrected in either the next return or the same return under specific circumstances.

The error can be corrected in the next return if the mistake relates to miscalculation of annual gross income or the GST collected, resulting in the final tax amount being incorrect, and the tax difference caused by the error is NZD1,000 or less. An error made in a GST return, which caused the tax difference to be equal to or less than NZD10,000 or 2% of the annual output tax GST collected, can also be corrected in the next return, provided that the purpose is not to delay the tax payment.

The taxable person can also correct an error in a later return if the error relates to an unclaimed input tax that is within two years of when the claim was left out, or if the error relates to an inability of the taxable person to obtain a tax invoice, a dispute over the proper payment amount for the taxable supply to which the deduction relates, a mistaken understanding that the supply to which the input tax relates was not a taxable supply or a clear mistake or simple oversight by the taxable person.

For errors that involve an adjustment to output tax or an overstatement of input tax, a voluntary disclosure should be made to the IRD and certain information relating to the error should be provided to correct the error in the same return. This can be done via calling the IRD or sending a letter by mail or email.

Digital tax administration. There are no transactional reporting requirements in New Zealand.

J. Penalties

Penalties for late registration. There are no penalties specifically imposed for late GST registra tion in New Zealand.

Penalties for late payment and filings. A penalty is assessed for the late payment of GST. A pen alty of 1% of the tax due is assessed on the day after the due date. If the tax remains outstanding, the following additional penalties apply:

• 4% of the tax that is due seven days after the due date

• 1% of the tax due each month that the tax remains unpaid

A late filing penalty may be imposed of NZD250 if the taxable person accounts for GST payable on an invoice basis or NZD50 if the taxable person is using the payments basis.

A penalty of NZD250 will apply for taxable persons that are required to file their GST return electronically but fail to do so.

Penalties for errors. Penalties are also assessed for underpayments of GST. This “shortfall pen alty” is assessed as a fixed percentage of the tax due, depending on the nature of the error, in the following amounts:

• Lack of reasonable care or unacceptable tax position: 20% of the tax due

• Gross carelessness: 40% of the tax due

• Adopting an abusive tax position: 100% of the tax due

• Tax evasion: 150% of the tax due

Penalties may be reduced by the IRD in certain circumstances by up to 75%.

A reduction of the shortfall penalty to zero may apply if the penalty is imposed for not taking reasonable care and if the taxable person makes a voluntary disclosure before notification of an IRD audit or investigation.

Absolute liability penalties (not exceeding NZD4,000 for a first offense) can be imposed where a taxable person does not provide information to the IRD when required to do so for changes to the taxable person’s GST registration details, although such penalties are not generally imposed.

In addition, use of money interest is calculated for underpayments and overpayments of GST for amounts equal to or over NZD100. The rate of interest is 7% for underpayments and 0% for overpayments.

Penalties for fraud. A shortfall penalty can be imposed for “tax evasion” or “adopting an abusive tax position.” See the detail above for more information. Depending on the circumstances, a taxable person may also be convicted for criminal offenses in addition to the tax shortfall penalties.

Personal liability for company officers. There are no specific rules in relation to the personal liabil ity for company officers in respect of GST errors.

Statute of limitations. The statute of limitations in New Zealand is four years. The statute of limitations (or “time bar”) for the IRD to amend a GST assessment is four years. Generally, the IRD may not reassess historical GST debts and amend the assessment to increase the amount assessed if four years have passed from the end of the GST return period in which the return was provided. However, the IRD may, at any time, amend an assessment to increase the amount of the assessment if the IRD considers that the person assessed has knowingly or fraudulently failed to disclose all of the material facts that are necessary for determining the amount of GST payable for a GST return period.