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New Zealand Confirms Tax Proposals In 2019 Budget

Friday, May 31, 2019

New Zealand's 2019 Budget, released on May 30, 2019, included no new announcements beyond those released ahead of the Budget on May 17.

On May 17, the Government confirmed that it will formally announce a proposal to reform the goods and services tax rules for telecommunications services in the upcoming Budget, to bring them in line with the current treatment of other remote services and international standards.

Announcing the proposals and a consultation on them, Revenue Minister Stuart Nash noted that the special rules for telecommunications services are now "out of step with the OECD's guidelines for GST and VAT and for establishing taxing rights."

"This raises the possibility of a person either being taxed twice or not at all for using global roaming overseas," he said.

The proposal involves aligning the GST treatment of most telecommunications services with the treatment of other remote services like digital downloads. Remote services are generally subject to New Zealand GST when they are supplied to a New Zealand-resident consumer.

Nash explained: "The OECD guidelines define remote services as services where it is not necessary for the supplier and the consumer to be in the same place (for example, a digital download). The OECD's definition of remote services is broad and includes telecommunication services. Therefore under these guidelines supplies of telecommunications services for example on international roaming services should be subject to GST when consumed by a New Zealand resident regardless of the consumer's location. It would ensure services rules are consistent with international best practice such as the United Kingdom and European Union."

Specifically, it is proposed that:

  • Most of the special rules in the Goods and Services Tax Act 1985 for supplies of telecommunications services will be repealed.
  • The GST treatment of most telecommunications services will be aligned with the treatment of other remote services and determined based on the residency of the consumer.
  • However, the GST treatment of some specific telecommunications services will be determined by the physical location of the recipient rather than their residency, if to receive the services the recipient needs to be at a specific location.

The proposed changes are not intended to change the GST treatment of most telecommunications services. However, the proposed changes would mean that:

  • Outbound mobile roaming services received by New Zealand residents overseas would be subject to GST at the standard rate of 15 percent; and
  • Inbound mobile roaming services received by non-residents in New Zealand would no longer be technically subject to GST.

"New Zealand has already adopted rules in 2016 consistent with the guidelines for most remote services other than telecommunications services. But the 2016 changes did not make that final step regarding telecommunications services. This proposal would close that loophole and protect the coherence of the system."

The changes are intended to apply from October 1, 2020.

Also announced was a repeal of the betting levy. The repeal is to be progressive, occurring over a three-year period.