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GST on cross-border trade in the spotlight

GST on international business deals is hurting New Zealand's ability to compete on the global market, according to the government, which is seeking feedback on options for addressing the issue.

GST on international business deals is hurting New Zealand's ability to compete on the global market, according to the government, which is seeking feedback on options for addressing the issue.

A discussion document released today for public consultation looks at changes that could be made to the GST system that would see non-resident businesses  treated in a similar way to New Zealand companies.

Revenue Minister Peter Dunne said the options presented would level the playing field for businesses trading with each other across borders.

“GST is a tax on consumption and should be a neutral tax for businesses, whether they are resident or non-resident. 

"By addressing the current limitations on non-resident businesses claiming back New Zealand GST, we can help level the playing field for local businesses as they compete internationally."

Dunne said he was aware of cases where New Zealand’s GST represented a real cost to non-resident businesses.

“For example, the aviation training industry provides training services to overseas airlines.  As the GST is a business-to-business cost, the outcome under the proposals in the discussion document would allow the overseas entities to register and claim back the GST,” he said.

The GST system prevents the double taxation of goods and services traded between New Zealand and other countries through the “destination principle”, which assigns the rights to tax to the country in which those goods and services are destined to be consumed.

This means exports are zero-rated and imports are subject to GST, in the same way as domestically produced goods and services that are consumed in New Zealand.

Among the proposed changes are the introduction of an enhanced registration system that would retain the existing ability for non-resident businesses to register for GST, but would couple this with rules allowing them to claim input tax in a broader range of circumstances, and a requirement for non-residents to be registered for GST or VAT (or, if not, be a registered business taxpayer) in their home jurisdiction.

The discussion document is available here: www.taxpolicy.ird.govt.nz.

Submissions close on October 7.


be a registered business taxpayer) in their home jurisdiction,