GST is a tax on the supply of goods and services in New Zealand by a registered person on any taxable activity they carry out. The rate for GST is 15%, although goods and services can be “zero-rated” or “exempt”.
Zero-rated
Certain taxable supplies are taxed at the rate of 0% rather than at the standard rate of 15%. You must include all zero-rated supplies in box 5 on your GST return along with your total taxable supplies. Supplies that are zero-rated in certain situations include;
- Duty-free goods
- Exported goods
- Exported services
- Exported vessels (ships)
- Financial services
- Foreign-based pleasure craft
- Goods not in New Zealand at the time of supply
- Household goods
- Imported services
- Internet sales
- Land transactions
- Refined fine metal
- Restraint of trade
- Sale of a “going concern”
- Service performed outside New Zealand
- Specialised tools
- Temporary imports
- Transport of goods to and from New Zealand
- Transport of people to and from New Zealand
Exempt
Exempt purchases and supplies are goods and services which are not subject to GST and are not included in your GST return. Examples of such include;
- Donated goods and services sold by non-profit bodies
- Financial services
- Renting a residential dwelling
- Residential accommodation under a head lease
- The supply of fine metals (gold, silver and platinum), other than zero-rated supplies
- Penalty interest
GST registration is required if the annual turnover of a business exceeds or is expected to exceed $60,000.
GST returns can be filed monthly, bi-monthly or six monthly. There are certain requirements for who must file monthly returns and who can file six monthly returns.
There are three methods of accounting for GST:
- Payments basis You must return the GST on your sales and income in your GST return once you receive a payment from your customers. You must claim the GST for your purchases and expenses in your GST return once you pay for them.
- Invoice basis You must return the GST on your sales and income in your GST return once you issue and invoice or receive a payment, whichever comes first. You must claim the GST for your purchases or expenses in your GST return once you receive an invoice or make a payment, whichever comes first.
- Hybrid basis You must return GST on your sales and income in your GST return after you issue an invoice or receive a payment, whichever comes first. This is the same as the invoice basis. You must claim the GST for your purchases and expense in your next GST return after you’ve paid for them. This is the same as the payments basis.
Sale of Physical and Digital Good via the Internet
Sale of Physical Goods via the Internet
If a GST-registered person sells goods via the internet and the goods are physically supplied to a customer in New Zealand, GST is chargeable at 15%.
If goods are sold via the internet and physically supplied to customers overseas the sales can be zero-rated for GST purposes. It is important to prove the goods have been exported (entered for export by the supplier) and sufficient evidence should be held to prove the export.
Sale of Digital Goods via the Internet
If a GST-registered person sells digital products via the internet which are downloaded, such as music, software or digital books, to a New Zealand customer they must charge 15% GST. (These products are treated as services for GST purposes). The Government released a discussion document in August 2015 suggesting possible changes to these rules.
Evidence Required to Prove Products are Exported
Scenario 1:
Physical goods are exported overseas by the supplier. The customer is located overseas.
- Delivery evidence, for example, bill of lading showing export by sea, air waybill for export via air, packing list or delivery note showing overseas delivery address, insurance documents.
- Purchase order showing overseas delivery address.
Scenario 2:
Physical goods are exported overseas by the supplier. The customer is located in New Zealand at the time of purchase.
- Delivery evidence, for example, bill of lading showing export by sea, air waybill for export via air, packing list or delivery note showing overseas delivery address, insurance documents.
- Purchase order showing overseas delivery address.
Scenario 3:
Digital products are downloaded by a customer who is located overseas.
- The customer should make a declaration at the time of the transaction that they are located overseas and that the products will be used outside New Zealand. For example, “I declare that I am not in New Zealand at this time and will not be making use of this supply in New Zealand” and provide their name and full address.
- Evidence of payment received from overseas customer. Credit card information may be a guide as certain credit card number series may only be issued in New Zealand. However, this process is changing and is not entirely reliable.
- Email address may suggest that the customer is overseas but is not final proof as a New Zealand resident can obtain an overseas email address.
- Internet Protocol (IP) address of the customer – although this is not final proof that the customer is overseas.
Note: In this scenario, as can be seen from the above list, it is unlikely that only one form of information will prove that the customer is overseas. It is expected that a reasonable attempt would be made to confirm the customer is overseas to support zero-rating. For more information refer to the E-Commerce and GST section on the IRD website.
GST Return Preparation and Account Code Classification
Giles & Liew can assist with GST return preparation. For coding purposes, the following document should act as a guide:
GST coding guidelines.
