GLOBAL INDIRECT TAX New Zealand Country VAT/GST Essentials kpmg.com TAX
b New Zealand: Country VAT/GST Essentials
New Zealand: Country VAT/GST Essentials Contents Scope and Rates 2 What supplies are liable to GST? 2 What is the standard rate of GST? 2 Are there any reduced rates, zero rates, or exemptions? 2 Registration 3 Who is required to register for New Zealand GST? 3 Are there penalties for not registering or late registration? 3 Are there any simplifications that could avoid the need for an overseas company to register for GST? 3 VAT Grouping 4 Is GST grouping possible? 4 Can an overseas company be included in a GST group? 4 Returns 4 How frequently are GST returns submitted? 4 Are there any other returns that need to be submitted? 4 VAT Recovery 5 Can I recover GST if I am not registered? 5 Does your country apply reciprocity rules for reclaims submitted by non-established businesses? 5 Are there any items that you cannot recover GST on? 5 Invoices 6 What do I have to show on a tax invoice? 6 Can I issue invoices electronically? 6 Is it possible to operate self-billing? 6 Transfers of Business 7 Is there a relief from GST for the sale of a business as a going concern? 7 Options to Tax 7 Are there any options to tax transactions? 7 Head Office and Branch Transactions 8 How are transactions between head office and branch treated? 8 Bad Debt 8 Am I able to claim relief for bad debts? 8 Anti-Avoidance 9 Is there a general anti-avoidance provision under GST law? 9 Penalty Regime 9 What is the penalty and interest regime like? 9 International Supplies of Goods and Services 5 How are exports of goods and services treated? 5 How are goods dealt with on importation? 6 How are services which are brought in from abroad treated for GST purposes? 6 All information reflected in this document was obtained/summarized from KPMG in New Zealand as of October 2011.
2 New Zealand: Country VAT/GST Essentials Scope and Rates What supplies are liable to GST? Goods and services tax (GST) is payable on taxable supplies. Taxable supplies are supplies of goods and services made in New Zealand by a registered person in the course or furtherance of a taxable activity. Supply includes all forms of supply. What is the standard rate of GST? The standard rate of GST is 15 percent. Are there any reduced rates, zero rates, or exemptions? Exempt supplies include: financial services that are not zero rated residential rent supplies of donated goods by non-profit bodies. Note: It is not possible to recover GST incurred in making exempt supplies. A reduced rate of 9 percent applies to the provision of accommodation in hotels, motels, and similar for longer than four weeks. Zero-rated supplies include: exported goods and services supplies of going concerns certain supplies of fine metal supplies of financial services to GST-registered persons making predominantly (75 percent) taxable supplies supplies of land after 1 April 2011 where both the vendor and purchaser are registered for GST.
New Zealand: Country VAT/GST Essentials 3 Registration Who is required to register for New Zealand GST? Any person that is carrying on a taxable activity and whose current or projected annual turnover in New Zealand is NZD60,000 or more. If you trade below the registration threshold, you can voluntarily register for GST. To register for GST it is necessary to apply for an Inland Revenue Department number and GST registration. You can download an IRD Number Application at: http://www.ird.govt.nz/forms-guides/number/ forms-500-599/ir596-form-nonindividualirdapp.html (nonindividual) http://www.ird.govt.nz/forms-guides/number/ forms-500-599/ir595-form-individualirdapp.html (individual) You can apply for GST registration online at http://www. ird.govt.nz/online-services/service-name/services-g/onlinegst-registration.html or download a GST registration form (IR 360) at http://www.ird.govt.nz/forms-guides/number/ forms-300-399/ir360-form-gstregistration.html Are there any simplifications that could avoid the need for an overseas company to register for GST? Non-residents who make supplies of goods and services are not required to register for GST if the supplies are made to GST-registered persons for the purposes of carrying on that person s taxable activity. Such supplies are deemed to be made outside New Zealand and are therefore not taxable supplies. However, such non-residents can, with the agreement of the recipients, agree that supplies are made in New Zealand and accordingly register for and charge GST. This also enables the non-resident to claim GST input tax. GST-registration is not required if the NZD60,000 compulsory GST registration threshold is only met because of: any ending of or substantial and permanent reduction in the size or scale of a taxable activity the replacement of any plant or other capital asset. Reverse charge services: These services are covered in more detail under the International Supplies of Goods and Services section. Are there penalties for not registering or late registration? A failure to register for GST when required to do so is an offense and the offender may be liable for a fine. Furthermore, where a person registers late, they will be liable for late payment penalties and interest on the outstanding amount.
4 New Zealand: Country VAT/GST Essentials VAT Grouping Is GST grouping possible? Yes, provided certain criteria are met. The main criteria are that there must be 66 percent common ownership among the members of the GST group, the group members must account for GST on the same basis (payments or invoice) and the group members must have the same taxable periods. Individuals, partnerships, trusts, and companies can all join GST groups. Can an overseas company be included in a GST group? Yes, provided the company meets the criteria for group registration. You can download the GST Group Registration form (IR 374) at http://www.ird.govt.nz/forms-guides/number/ forms-300-399/ir374-form-gst-groupregistration.html Returns How frequently are GST returns submitted? Returns are lodged: six monthly, if annual turnover is less than NZD500,000 or IRD approval has been granted two monthly, if annual turnover is less than NZD24 million monthly, if annual turnover is greater than NZD24 million. You can elect a monthly taxable period if your turnover is less than NZD24 million. Are there any other returns that need to be submitted? No.
New Zealand: Country VAT/GST Essentials 5 VAT Recovery Can I recover GST if I am not registered? No. Does your country apply reciprocity rules for reclaims submitted by non-established businesses? Not applicable in New Zealand. Foreign businesses that are not registered for GST in New Zealand cannot recover input GST. Are there any items that you cannot recover GST on? You are not entitled to input tax credits on: Acquisitions that relate to making exempt supplies. Where GST relates to both taxable and exempt supplies, you need to make an apportionment Acquisitions of a private nature. Where GST relates to both business and private activities, you need to make an apportionment. GST input tax can be claimed in respect of entertainment expenditure and fringe benefits provided to employees. However, GST must be returned of: the GST fraction of the entertainment expenditure that is non-deductible for income tax purposes. International Supplies of Goods and Services How are exports of goods and services treated? Goods A supply of goods is zero-rated if the goods are exported by the supplier or in limited situations by the purchaser. Other supplies that are zero-rated include: Goods supplied to repair temporary imports or goods in transit. Ships and aircraft s stores for use on international voyages or flights services. Examples of services that are zero-rated include: Supplies where the recipient is not a New Zealand resident and is outside New Zealand, unless the services are directly in connection with land or moveable personal property in New Zealand. Services physically performed outside New Zealand. Services supplied directly in connection with land or moveable personal property outside New Zealand. Intellectual property rights for use outside New Zealand or to a recipient who is not a New Zealand resident and is outside New Zealand.
6 New Zealand: Country VAT/GST Essentials Invoices How are goods dealt with on importation? Imported goods are subject to GST when they are entered for home consumption. Generally the GST is payable upon importation, unless the Deferred Payment Scheme has been entered into. This scheme enables you to defer the payment until the 20th day of the month following the month of importation. The payment is made by direct debit from your bank account and covers all importations in the particular month. You can download a fact sheet on the Deferred Payment Scheme (Fact Sheet 17) from www.customs.govt.nz How are services which are brought in from abroad treated for GST purposes? If you are making less than 95 percent taxable supplies and you buy in services from outside New Zealand, you will be required to apply the reverse charge. This is intended to take away any GST advantage of buying those services from outside New Zealand. Under the reverse charge you are required, as the recipient, to account for GST as output tax on your GST return, and are able to recover the GST as input tax to the extent of your input tax recovery ratio. What do I have to show on a tax invoice? Tax invoices only have to be issued if requested by the recipient of the taxable supply and if the GST-inclusive value of the supply is NZD 50 or more. If you have to issue a tax invoice it should contain the following information: the words tax invoice in a prominent place the name and GST-registration number of the supplier the name and address of the recipient the date of issue of the tax invoice a description of the goods and services supplied the quantity or volume of the goods and services supplied either: the GST-exclusive amount, the GST and the GST-inclusive amount; or the GST-inclusive amount, and a statement that it includes GST, provided the GST is three twenty thirds of the total amount. Can I issue invoices electronically? Yes. Is it possible to operate self-billing? Yes, provided Inland Revenue Department approval is obtained. The supplier must agree that the recipient of the supply can issue a Buyer Created Tax Invoice and certain other requirements must be met.
New Zealand: Country VAT/GST Essentials 7 Transfers of Business Is there a relief from GST for the sale of a business as a going concern? Yes. In certain circumstances the supply of a taxable activity as a going concern is zero-rated. Among other things, the recipient must be GST-registered, and the supplier must supply all of the goods and services necessary for the continued operation of the taxable activity. Also, the parties must agree in writing that the supply is of a going concern. Options to Tax Are there any options to tax transactions? No.
8 New Zealand: Country VAT/GST Essentials Head Office and Branch Transactions How are transactions between head office and branch treated? Transactions between head office and a branch office are generally not supplies and therefore there is no GST payable. An exception is where the branch chooses to register separately so that it can account for GST separately from head office. In this case the branch is treated as if it were a separate entity, so that transactions between head office and the branch are treated as though they were supplies. Bad Debt Am I able to claim relief for bad debts? Yes, if the debt is written off as a bad debt. If you subsequently receive payment for the supply then you will have to pay back the GST component. A branch is also treated as a separate person from head office for the purposes of the reverse charge. In other words, supplies of services between an overseas head office and a New Zealand branch are generally subject to the reverse charge where the New Zealand branch is making less than 95 percent taxable supplies.
New Zealand: Country VAT/GST Essentials 9 Anti-Avoidance Is there a general anti-avoidance provision under GST law? Yes. It applies in any case where there has been a tax avoidance arrangement entered into by the taxpayer, and the arrangement has as one of its purposes tax avoidance (so long as that purpose is more than incidental). Any arrangements caught by this provision will be void for tax purposes. Penalty Regime What is the penalty and interest regime like? Civil penalties are payable when GST is paid late or underpaid. Late payment penalties are levied initially at a rate of 1 percent on the day after the due date for payment of the GST, a further 4 percent is then levied if the outstanding amount remains unpaid seven days after the due date. A 1 percent incremental penalty applies for every month thereafter. Shortfall penalties range from 20 percent of the shortfall amount for not taking reasonable care, to 40 percent for gross carelessness, to 100 percent for taking an abusive tax position, to 150 percent for evasion. These percentages can be reduced for previous good behavior, or if you make a voluntary disclosure to the Inland Revenue Department.
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