The Government has confirmed its proposed changes to GST on goods purchased online from overseas will come into effect in a year’s time.
Offshore suppliers will be required to register, collect and return New Zealand GST on goods valued at or below $1000 when they’re supplied to Kiwi consumers. This won’t apply to SMEs, but only those exceeding $60,000 of total taxable supplies of goods and services to New Zealand in a 12-month period. This is the same threshold that applies to domestic businesses.
Offshore suppliers will not be required to collect GST on goods supplied to GST-registered businesses.
The Government says the proposed changes won’t necessarily mean consumers’ online purchases will become more expensive as tariffs and border cost recovery charges will be removed from imported consignments valued at or below $1,000. Goods valued below $400 currently don’t meet the threshold for tax and would therefore become more expensive under the new rules, but those between $400 and $1000 will be cheaper.
The current processes for collecting GST and other duty at the border by Customs, plus other border processes for risk-management against imported goods, will continue to apply for consignments valued over $1,000. There will be processes put in place so Customs does not collect GST on goods in a consignment over $1,000 if GST was already collected by the supplier.
The new rules will also apply to online marketplaces such as Trade Me, meaning it would effectively need to take care of levying GST on behalf of its overseas sellers.
Trade Me head of marketplace Stuart McLean said yesterday that the company supports the Government’s move: “If the law passes as Minister Nash has described it this morning the new GST law will impact just 0.2 per cent of our sellers and less than 5 per cent of our professional sellers. It’s only 3 per cent of total value of items sold on Trade Me.”
“We see a possible advantage for us in that we’d become an easy place for overseas sellers to list their items as we’ll be able to take care of the GST stuff for them and get it paid.”
Retail NZ has welcomed the move. GM for public affairs Greg Harford commented that the new tax rules would address a significant competitive disadvantage which Kiwi retailers had long suffered.
"GST is a universal tax on consumption in New Zealand. Kiwi retailers have been paying GST since 1986, while foreign firms selling into New Zealand have long had a free-ride from the New Zealand taxpayer. Retail NZ has been campaigning on this issue for a number of years, and it is good news for New Zealand as a whole that the Government has confirmed it will level the playing field.
"The proposal is in line with international practice. For example, Kiwi retailers selling into Australia already have to pay Australian GST, and low thresholds apply in most other markets. While the solution is not perfect, it is a substantive step forward at delivering a level playing field for New Zealand businesses.
"More than three-quarters of all sales from foreign websites come from a relatively small number of large businesses that make more than $60,000 worth of sales into New Zealand, and the average foreign transaction is around $114 in value. The vast majority of foreign purchases will therefore incur GST from 1 October.
"Customs Duty is still charged on a number of items in addition to GST when they are imported by New Zealand retailers, and the Government's proposal does not deal with this issue. However, it is a significant step forward which will be welcomed by the New Zealand retail and wholesale sector."
More information about the changes can be found here.