The proposal of New Zealand’s Inland Revenue Department (IRD) requiring off-shore suppliers of Low Value Goods (LVG) to levy Goods and Services Tax (GST) at 15% when sold to un-registered consumers in New Zealand has been an area of concern for end consumers. As per the Discussion Document released by the Government, an overseas supplier would be required to register and charge GST if, the total value of goods and services they supply to New Zealand consumers (i.e., delivery address is in New Zealand) is above the $60,000¹ registration threshold and the item supplied to the New Zealand consumer is valued at or below $400. The proposal is expected to be implemented with effect from 1 October 2019. The new rules are predominantly aimed at foreign on-line websites supplying goods to end consumers located in New Zealand so that the domestic suppliers get a level playing field.

Among others, one of the significant concerns received by the Government on the proposed rules is that the current threshold value of $400 appears to be low and would lead to compliance challenges for the off-shore suppliers and may also lead to double taxation (where adequate checks and balances are not installed), resulting in a significant increase in the cost of goods for the end customers. To address the issue, New Zealand’s Minister for Revenue, Stuart Nash has announced that the current threshold of $400 would be increased to $1,000 and no customs duty and cost recovery charges would be collected from consumers in respect of goods valued at or below $1,000. In effect, only GST at 15% would be applicable on goods valued at or below $1,000.

The above proposal is likely to be well-received and re-store confidence of both suppliers of off-shore goods and end consumers in New Zealand. It would now be important to review the draft legislation to see how the Government addresses other concerns (e.g., definition of electronic market place, treatment of returns, discounts, vouchers, combined consignments etc.) to see the real impact of the proposed changes on the various stakeholders.

Endnote

1. Currency references in this Alert are to NZ$.

For additional information with respect to this Alert, please contact the following:

Ernst & Young New Zealand, Auckland

• Paul Smith, Head of Indirect Tax | paul.smith@nz.ey.com
• Simon Dobson, Indirect Tax | simon.dobson@nz.ey.com
• Saket Sharma, Indirect Tax | saket.sharma@nz.ey.com
• Mark Cormack, Customs | mark.cormack@nz.ey.com 

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