New Zealand GSTLearn how the 2019 New Zealand law affects your business.
New Zealand has passed new legislation that impacts overseas businesses selling goods directly to New Zealand consumers. This new law went into effect on December 1st, 2019, and is very similar to the low-value goods law enacted by Australia in 2018.
Overseas businesses, marketplaces, and redeliverers, who supply or are likely to supply more than 60,000 NZD in low-value goods and services directly to New Zealand consumers in a 12-month period, are required to collect and remit GST (Goods and Services Tax) directly to New Zealand. GST is a consumption tax that New Zealand applies to most goods imported into its country.
The following should be considered to determine if you’re over the 60,000 NZD threshold:
- Low-value goods that are each valued at 1,000 NZD and below, and sold directly to New Zealand consumers
- Online services and digital products sold directly to New Zealand consumers
- Amounts paid by New Zealand consumers for services such as delivery, insurance, etc.
When determining if you meet the threshold, do not include supplies sold to New Zealand businesses or goods that are each valued over 1,000 NZD.
Prior to December 1st, 2019, New Zealand customs collected duty and tax at the border when the amount of duty and tax due on the shipment is greater than 60 NZD. When New Zealand collects duty and taxes at the border, they also assess an import transaction fee and MPI levy, which equals a combined amount of 55.71 NZD in addition to the duties and taxes. This gets expensive for an online shopper and is part of an archaic system designed before cross-border ecommerce was relevant. A change was needed.
After December 1st, 2019, New Zealand customs will now collect duty, an import transaction fee, and MPI levy at the border on shipments valued over 1,000 NZD. This is good news for the ecommerce world because it effectively increases the number of shipments that will enter New Zealand duty-free. However, things get a little more complicated with GST.
If your business is below the 60,000 NZD threshold, then you do not need to do anything. Duty, GST, and fees will be collected at the border on shipments over 1,000 NZD or for any shipments with alcohol and tobacco of any value. For most merchants, this will actually result in an increased number of shipments that will clear duty and tax-free.
If your business exceeds the 60,000 NZD threshold, then you will be required to register for, collect, and remit GST directly to New Zealand on all low-value goods. Duty and GST on high-value goods will be collected at the border or, for simplicity and if you meet certain requirements, you may elect to collect and remit GST on all goods (low and high value). This may seem a little confusing, so keep reading and we’ll explain this in more detail.
The receipt supplied to your New Zealand customers will also need to meet certain requirements (also explained later).
Registration for New Zealand GST is a simple process that can be completed online. The registration must be completed by the person who will be responsible for filing the GST returns. It is a three-step process with the following instructions provided by the New Zealand Inland Revenue website.
- Complete the registration at ird.govt.nz/myir.
- Call New Zealand Inland Revenue at +64 4 890 3056 to activate your account.
- Set up a password. After your account is activated, you will receive an email with the information required to set up your password. This must be completed within 30 minutes.
If you’ve registered for GST, there are a couple of options for how you can determine the amount of GST to collect at checkout. GST is 15% and applied to the product value, shipping, and insurance costs.
- Collect GST only on low-value goods and allow GST on high-value goods to be collected at the border.
For an order with a set of golf clubs worth 1,200 NZD and golf shoes worth 500 NZD, you would only collect GST for the golf shoes and any shipping costs associated with the golf shoes. The GST for the golf clubs would be assessed at the border.
- Collect GST on all goods (both high and low-value goods).
You would collect GST for both the golf shoes and golf clubs, along with the GST associated with the shipping cost on the order.
The first option is much more complicated and not recommended for most ecommerce merchants. When a shipment is a mix of low-value and high-value goods, it would require that you only collect and remit GST on the low-value goods. Since GST is applied to the shipping costs, you would need to use a reasonable apportionment method to collect and remit GST on the portion of shipping costs applied to low-value goods.
This process would be messy and prone to problems for most merchants, but if you feel this method is best for your business, then the New Zealand website provides more information. They have also created a helpful video that walks through many questions and scenarios regarding mixed shipments.
Collecting GST at checkout on all goods will be the most reasonable method for most ecommerce merchants. This will allow for a more straightforward calculation that will be easier to understand for both the merchant and consumer. To calculate the amount of GST to collect, apply 15% to the selling price of the goods and any shipping, insurance, and service costs.
When selling to GST-registered businesses in New Zealand, you will not be required to collect GST on the order if the business is registered for GST and the goods are for business use. If the goods are not for business use, then GST should be charged. If you incorrectly charge GST on a business-to-business order, you can either:
- Issue a full tax invoice on orders valued under 1,000 NZD so the business can be refunded by their government; or
- Refund the GST to the purchaser (this is the only option for orders valued over 1,000 NZD).
If you choose to refund the GST to the purchaser, be sure to withhold this amount from the GST you remit at the end of the quarter.
You may choose (for simplicity’s sake) to intentionally collect GST on all orders to New Zealand, including sales to GST-registered businesses. This would apply if you primarily sell goods to consumers and don’t want to differentiate between businesses and consumers. If you choose this route, you must supply your customer with a full-tax-invoice, which is discussed in more detail later in this article, or be willing to issue a refund after the sale to GST-registered businesses.
Whatever method you use to collect GST, make sure you store the data appropriately so you remit the proper amount of GST to New Zealand.
How to fulfill your order and provide a proper receipt to your customer
GST-registered businesses will have some additional documentation that must be supplied with the shipment as well as a receipt/invoice that must be sent directly to the purchaser.
When a package is entering New Zealand, customs officials will need to clearly understand which items GST has already been collected on. These details can be communicated in the comments section of the commercial invoice and/or by supplying a copy of the customer receipt with details that GST has already been collected.
If you choose to only collect GST on low-value goods, then the information must be itemized so the customs officials know to collect GST on high-value goods at the border. If no information is provided on the invoice, customs officials will default to collecting GST on all products when the combined value is over 1,000 NZD, which may result in double taxation.
The simplest solution will be to apply GST to all goods and include a statement in the comments section of the commercial invoice to notify your transportation company and New Zealand customs that GST has already been collected on this shipment. An example statement could be: "GST has been collected at the point of sale for all items in this consignment and will be remitted via GST number 123456789."
You will not currently be able to add these documents/comments to a postal/mail shipment. Your customers will have to rely on the receipt you give them as proof of GST payment to avoid paying GST again on delivery. The good news is that these cases will be rare, because GST will only be collected upon delivery if the consignment is over 1,000 NZD.
If you are required to collect and remit GST, you will also be required to supply New Zealand customers with an appropriate receipt that notifies them of the GST applied to their order.
The receipt is sent to New Zealand consumers and must include the following:
- Supplier’s name and GST registration number
- Date of supply
- Date the receipt is issued (if different to the date of supply)
- Description of the goods
- Price paid for the goods, and the amount of GST included (which may be expressed in a foreign currency)
- An indication of which goods have had GST charged. (If GST is charged on everything listed on the receipt, the supplier can provide this indication by either showing the amount of GST on each line item or showing the total price and a statement that it includes GST.)
Full tax invoice
When GST is collected on low-value goods to a New Zealand business, you can choose to refund the New Zealand business for the GST amount collected or you can send them a full tax invoice. The New Zealand business can use the tax invoice to claim a GST deduction on their GST return for orders valued less than 1,000 NZD. Any orders with goods valued over 1,000 NZD to a GST-registered business will need to be issued a refund.
The full tax invoice must include the following:
- The words “tax invoice” in a prominent place
- Supplier’s name and GST registration number
- Name and address of the recipient
- Date of issue
- Description of the goods and services supplied
- Quantity or volume of the goods and services supplied
- Price paid for the goods excluding GST, the total GST charged and the price paid including GST (which may be expressed in a foreign currency), or where GST is included in the price, the price paid, and a statement that it includes GST.
As you may notice, the receipt and tax invoices are very similar. You can choose to issue a single document that qualifies as both a receipt and a full tax invoice as long as the document fulfills the requirement for both. This can simplify business processes and may be the preferred option for many businesses.
Payment of GST can be handled electronically through the New Zealand Inland Revenue website. There are a number of different payment options available, and you will receive more details on how to pay GST after you register for your GST number, but the process is fairly straightforward.
You will be required to remit GST funds to New Zealand quarterly. The lone exception to this is the first period, which is a length of four months (December 1st, 2019 to March 31st, 2020). You will have until the 28th of the month following the end of the quarter to remit GST except for Q1, which has a deadline of May 7th.
Here is a schedule:
- Q1 - Payment due May 7th
- Q2 - Payment due July 28th
- Q3 - Payment due October 28th
- Q4 - Payment due January 28th
Be sure to keep track of the GST collected throughout the quarter to save you time in calculating the amount to remit. If you are required to remit funds in New Zealand Dollars, you can use the exchange rate on the day you remit funds, the last day of the taxable period, or the time of supply to your customers. In other words, whatever is most convenient for you.
It may be tempting for some merchants over the 60,000 NZD threshold to want to avoid registering for GST.
We highly recommend you comply with the new law. New Zealand will try to claw back on historical revenue and may be successful at accomplishing this in cooperation with the United States, Europe, Canada, Australia, and other countries.
Below is information directly from the NZ government on how they will handle non-compliance.
If a business does not want to work with us, New Zealand has agreements with other countries on:
- Mutual cooperation
- Information exchange
- Assistance in tax matters
These agreements cover an extensive network of jurisdictions, including our major trading partners.
The agreements mean New Zealand can request other foreign tax authorities to provide information about foreign taxpayers, as well as share information with foreign tax authorities about foreign taxpayers that are under audit in New Zealand. Inland Revenue and Customs will also share information and work together to help identify instances of non-compliance.
When we detect someone has not registered for GST when they should be, we can:
- Issue a default assessment of the GST liability
- Register the debt with New Zealand courts
- Register and pursue the debt in the courts of the country that the supplier is based using our international agreements.
New Zealand also has agreements with some foreign tax authorities allowing them to collect unpaid GST on New Zealand's behalf.
- Evaluate immediately if you are required to register for New Zealand GST.
- If you are not required to register, there is nothing to do right now, but be sure to evaluate periodically in the future.
- If you are required to register, then we recommend you keep it simple. You should be able to find ways to comply with the new law without major disruption to your current business processes.