by In New Zealand, the Goods and Services Tax (GST) is a value-added tax imposed on the supply of goods and services.
GST regulations and compliance requirements in New Zealand:
Registration: Businesses with an annual turnover of NZD 60,000 or more must register for GST. However, voluntary registration is also possible for businesses with lower turnover. Non-resident businesses providing taxable supplies in New Zealand may also need to register for GST.
GST Rates:
The standard GST rate in New Zealand is 15%. However, certain goods and services may qualify for special GST rates or exemptions. For example, some food items, financial services, and residential rents are exempt from GST.
Taxable Supplies:
Most supplies of goods and services in New Zealand are subject to GST. This includes sales, leases, and imports of goods, as well as services provided within New Zealand.
Input Tax Credits:
Registered businesses can claim input tax credits for GST paid on business-related purchases and expenses. Input tax credits can be offset against the GST collected on sales, reducing the overall GST liability.
GST Returns:
Registered businesses are required to file regular GST returns, typically on a two-monthly or six-monthly basis. The GST return reports the GST collected on sales and the GST paid on purchases. Payments or refunds are then reconciled based on the difference between the two.
Compliance:
GST compliance in New Zealand involves maintaining accurate records of sales, purchases, and expenses, as well as keeping supporting documentation. Businesses are required to issue tax invoices for supplies that exceed a certain threshold and retain these records for at least seven years.
Online Services:
Inland Revenue, the tax authority in New Zealand, provides an online portal called my IR where businesses can file their GST returns, make payments, and manage their GST obligations. It is important to ensure timely and accurate reporting through the online system.
Bad Debt Adjustments:
If a business is unable to recover an outstanding debt and has accounted for GST on that debt, it may be eligible for a bad debt adjustment. This allows for a reduction in the GST liability on the uncollectible debt.
Audits and Penalties:
Inland Revenue conducts audits and investigations to ensure compliance with GST regulations. Non-compliance, such as late filing, incorrect reporting, or failure to register for GST, may result in penalties, fines, or interest charges.
Voluntary Disclosure:
If a business identifies errors or omissions in their GST returns, they are encouraged to make voluntary disclosures to Inland Revenue. Voluntary disclosures can help mitigate penalties and demonstrate a commitment to compliance.
GST Thresholds for Non-Resident Businesses:
Non-resident businesses that make taxable supplies in New Zealand may be required to register for GST regardless of their turnover. If their supplies exceed NZD 60,000 in a 12-month period, they must register for GST. Alternatively, they can choose to register voluntarily.
Timing of GST Payments:
The timing of GST payments depends on the taxable period and the filing frequency chosen by the business. Two-monthly filers generally need to make payments by the 28th of the month following the end of the taxable period, while six-monthly filers have different payment due dates. It’s important to check the specific due dates applicable to your business.
Importing Goods and Services:
GST is applicable to imported goods and services into New Zealand. For imported goods, GST is generally collected by Customs at the border and paid by the importer. Imported services are subject to GST, and the recipient of the service is responsible for self-assessing and accounting for the GST.
Special GST Schemes:
New Zealand offers special GST schemes for certain industries or types of businesses. These schemes include the payments basis for small businesses, which allows them to account for GST when payments are received, and the hybrid basis for non-profit bodies, which provides simplified GST accounting methods.
GST on Digital Services:
From 1 December 2019, non-resident suppliers of digital services to New Zealand consumers are required to register for and charge GST, regardless of their turnover. This includes services such as streaming or downloading of movies, music, e-books, software, and other digital content.
GST on Online Purchases:
From 1 December 2019, GST is also applied to low-value imported goods (valued at NZD 1,000 or less) purchased by New Zealand consumers from overseas suppliers. Overseas suppliers are required to register and collect GST on these sales.
Exports and Zero-Rated Supplies:
Exports of goods and services from New Zealand are generally zero-rated, meaning no GST is charged. However, certain conditions must be met to qualify for zero-rating. Zero-rated supplies also include certain supplies to businesses registered for GST.
Input Tax Deductions: When claiming input tax deductions, businesses must ensure that the expenses are directly related to their taxable supplies. Some expenses, such as those related to exempt supplies or private use, may not be eligible for input tax deductions.
Annual Adjustments:
Registered businesses with significant seasonal fluctuations or significant changes in their supplies may be eligible for an annual adjustment. This allows for a retrospective adjustment of GST returns to better align with the business’s annual GST liability.
Penalties and Interest:
Non-compliance with GST obligations, such as late filing, underpayment, or non-payment of GST, can result in penalties and interest charges imposed by Inland Revenue. It’s important to meet the filing and payment deadlines and ensure accurate reporting to avoid potential penalties.
