On the topic of GST and cross-border transactions, a relatively unknown rule affecting the importers of services into New Zealand was enacted in 2003 under the Taxation (GST, Trans-Tasman Imputation and Miscellaneous Provisions) Act 2003.
From 1 January 2005, subject to certain provisions the recipients of supplies of imported services are required to gross up the price of services for GST, collect the amount from the offshore supplier and pay the GST to Inland Revenue.
This is required if the services would otherwise be subject to GST if they had been supplied in New Zealand, and not by offshore suppliers.
In addition,
if:
the New Zealand-based recipient of the supplies is already registered for GST,
and:
in the 12 months prior to the supply, the recipient has not made supplies which are at least 95% in the aggregate, ‘taxable supplies’ for GST purposes,
then: the imported services are subject to GST,
if:
the New Zealand-based recipient of the supplies is not already registered for GST,
and:
the value of the imported supplies takes the amount of revenue over NZ$60,000,
then: the New Zealand-based recipient of the supplies is required to register for GST, collect and pay the GST to Inland Revenue.
The above is referred to as the GST reverse charge mechanism, and, in common with the current proposal to lower the GST threshold on imported goods, is aimed at making the price of New Zealand goods and services more equitable when compared with the price of offshore goods and services which may not, depending on their nature, currently attract GST.