GST will apply to most low-value imported goods from 1 October 2019
Currently, goods purchased from overseas are generally not subject to GST unless the total GST and duty payable on those goods is at least $60. Where no duty is payable, this roughly translates to GST applying to goods costing a total of $400 or more.
The days of being able to buy these low-value goods from overseas websites free of GST may, however, be coming to an end.
The Government has released a discussion document “GST on low-value imported goods: An offshore supplier registration system” which proposes requiring offshore suppliers to register and account for New Zealand GST on low-value goods which are sold to New Zealand consumers when the offshore supplier makes total supplies to New Zealand consumers in excess of NZ$60,000 in a 12-month period.
Referred to as the ‘Amazon Tax’, it is very similar to the ‘Netflix Tax’ which came into effect in October 2016 and compels suppliers of remote services to charge New Zealand GST if they make supplies to New Zealand consumers in excess of the $60,000 GST registration threshold.
Online marketplaces and re-deliverers of offshore goods into New Zealand may also be required to register and account for GST on low-value goods if the NZ$60,000 registration threshold is exceeded.
GST on goods which cost more than NZ$400 will continue to be collected at the border by New Zealand Customs.
If the proposals proceed, it is likely that offshore sellers of low-value goods will pass on the additional GST cost to consumers. This will make buying goods from offshore retailers more expensive, in line with the intention to level the playing field for local retailers who have long campaigned for equal tax treatment with offshore retailers.
The extension of GST to low-value items is conservatively estimated to raise an additional NZ$87m in GST for the Government (this is likely to be much more given that the Netflix Tax was proposed to bring in an additional $40m annually and has in fact brought in $162m since coming into effect on 1 October 2016).
The extension will also bring New Zealand in line with other countries: Australia and Switzerland are introducing similar rules from 1 July 2018 and 1 January 2019 respectively and the EU has announced plans to implement a similar system for the collection of VAT by 2021.
Submissions on the discussion document close on 29 June 2018, with draft legislation expected to be introduced by November 2018. If enacted, the new rules will apply from 1 October 2019.
Contact your Hayes Knight advisor if you would like to discuss the proposals further.