October 13 2016 by Noé Vicca - Principal
The New Zealand version of the “Netflix” tax commenced on the 1st October 2016.
New Zealand is not alone in this expanding area of tax compliance with European Union states, Norway, South Korea, Japan, Switzerland and South Africa having already implemented rules to deal with this “untaxed” cross border exposure with e-commerce. Australia’s has also enacted its own version of Netflix tax however the Law does not come into effect until 1 July 2017.
The Netflix tax as it applies to digital services is on the back of Governments worldwide reassessing GST/VAT on digital transactions from being a supplier based tax to a destination based locale consumption tax. In New Zealand, the Netflix Tax applies GST (Good and Services Tax) to digital and remote services sold by offshore sellers to New Zealand consumers.
The Netflix Tax will impact offshore businesses (who will need to register and collect the GST) and in turn the New Zealand consumers subscribing to these services (who will likely bear the increased costs). The offshore suppliers of remote services to consumers will have a liability to register for New Zealand GST if supply of digital services exceeds the threshold of NZ$60,000 per annum, otherwise those below the threshold are not required to either register nor remit GST to the New Zealand Government.
What does this mean for GST-registered New Zealand businesses
New Zealand businesses will not be charged GST on remote services they purchase from non-resident suppliers if the supply is part of their GST-registered business activities, and before or at the time of purchase the business owner:
• notifies the supplier that they are registered for GST, and
• they provide the supplier with their New Zealand GST registration number or business number.
Significant fines, of up to NZ$50,000, can apply to New Zealand-resident consumers who deliberately and repeatedly represent that they are a business to an overseas services supplier
New GST rules on imported services
The new rules for GST on imported services for New Zealand will operate as follows:
• There is a 15% tax added to the price of most goods and services supplied into New Zealand
• Remote services (as defined) are those services supplied to New Zealand-resident consumers
• It is these services that will be deemed as being performed in New Zealand and subject to GST.
What is a qualifying remote service
A qualifying remote service would include:
• Supplies to digital content such as e-books, movies, TV shows, music and online newspaper subscriptions;
• Online supplies of games, apps, software and software maintenance;
• Webinars or distance learning courses;
• Insurance services;
• Gambling services;
• Website design or publishing services;
• Legal, accounting or consultancy services
Disclaimer: The contents herein are intended for general information only and should not be construed as legal or accounting advice. Vicca Chartered Accountants Brisbane bears no responsibility for any loss that might occur from reliance on information contained in this publication. Please do not reproduce, transmit or distribute the contents herein in any form without prior permission from Vicca Chartered Accountants, Taxation Accountants Brisbane Australia.