An estimated $533m of GST-free low-value goods were imported into New Zealand in 2016, and this figure is projected to grow to around $850m by 2021.
The Tax Working Group says that in principle imported low-value goods should be subject to GST, and from a commercial perspective local retailers have argued the non-taxation of these goods places them at a significant price disadvantage.
Today the Government released a discussion document that proposes to address this issue by requiring certain non-resident suppliers to register for GST and account for GST on their supplies of low-value goods to New Zealand consumers.
Proposed features of the "Amazon tax"
- From 1 October 2019 non-resident suppliers who supply more than $60,000 of goods and services a year to New Zealand consumers will be required to register for GST and account for GST on supplies of goods to New Zealand consumers that have a value of $400 or less.
- Goods that have a value of greater than $400 will not be subject to the regime. Customs will collect GST on such imports.
- The regime is targeted at supplies made to New Zealand consumers.
- "Marketplaces" and "re-deliverers" will be subject to the new regime.
- Non-residents registered under the regime will be able to file GST returns on a quarterly, "pay only" basis.
The Government has invited submissions on the proposed regime, which are due by 29 June 2018.
Chapman Tripp comments
The Tax Working Group says that in principle imported low-value goods should be subject to GST. The main issue is how this GST should be collected. Of the various options that the Government has been considering, such as:
- imposing GST between the point of sale and delivery (e.g. by taxing courier companies); and
- imposing GST on recipients of goods after they have been delivered;
the proposal to impose GST on non-resident suppliers is in our view the most sensible choice. The proposal aligns with the "Netflix tax" for imported services introduced in 2016, and with international developments in this space (including Australia's low-value goods regime, which will apply from 1 July 2018).
Having said that, the devil of the regime will be in the detail. The discussion document notes the "Netflix tax" for imported services has been "effective" and "relatively easy to comply with", but we suspect the implementation of the proposed "Amazon tax" may not be as smooth. In particular, we expect that many more non-residents supply goods to New Zealand consumers than services, and there is a risk many of these suppliers will not be aware that New Zealand is introducing this regime.
Affected parties should keep an eye on these developments. Assuming these proposals go ahead, affected parties will need to get their systems and customer contracts in order before 1 October 2019.
The information in this article is for informative purposes only and should not be relied on as legal advice. Please contact Chapman Tripp for advice tailored to your situation.