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B2B GST: Enhanced Registration for Non-Residents

On 13 September 2012 the Taxation (Livestock Valuation, Asset Expenditure and Remedial Matters) Bill was introduced into Parliament.  As well as a number of other changes, the Bill contained GST amendments mainly aimed at non-residents doing business in New Zealand.

The focus of the GST proposals is the introduction of a new “enhanced GST registration” as part of efforts to reduce the GST cost for non-residents doing business in New Zealand.  The change essentially allows non-resident businesses to register for GST without making taxable supplies in New Zealand.   The non-resident will be able to register using the “enhanced registration system” if the following are satisfied:

  • Either
    • The non-resident is  registered for a consumption tax in their country of residence; or
    • If no consumption tax system is in place, the non-resident carries on a taxable activity off-shore with a turnover exceeding $60,000; and
  • The input tax in New Zealand for the first period of registration is more than $500.

The intention of the proposals is to eliminate the competitive disadvantage caused by irrecoverable GST costs incurred by non-residents. 

The proposed changes complement the existing rules and are optional for non-residents.  The proposed rules only apply to B2B transactions, not business-to-consumer. 

There are some consequential amendments which could adversely impact some non-residents already doing business in New Zealand, such as disallowing the GST grouping of non-residents with resident companies from 13 September 2013.  

In addition to the enhanced GST registration system, the following amendments are also proposed:

  • Increasing the range of circumstances that cash prizes are able to be deducted when calculating GST on competition proceeds. The amendment will correct a drafting error.
  • An “opt out” option allowing agents and principals to agree to treat the principal’s provision of goods and services to the tax agent and the agent’s onward supply as separate supplies for GST purposes.  This effectively enables 2 tax invoices to be issued for the same supply. The use of bad debt rules will be limited when principals and agents use this new invoicing procedure.
  • An extension of the temporary exemption for certain local authorities to change to the invoice accounting basis.  The bill proposes that the eight local authorities yet to make the change to pay output tax on large rates debts to be spread over 72 months without the imposition of penalties or interest.
  • Added flexibility in keeping records overseas to be aligned with proposed changes to the Tax Administration Act 1994.

There is no scheduled enactment date for the Bill.  However, the proposed application date for the amendments above is the 2013-2014 income year.

If you require any specific advice or assistance, please do contact your usual EY tax advisor or one of our Indirect Tax specialists.  

Paul Smith
Executive Director, Indirect Tax (Auckland)
Tel: +64 9 300 8210

Russell Hayes
Executive Director, Indirect Tax (Wellington)
Tel:  +64 4 470 8600

 

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