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New Zealand GST Tax On Digital Downloads

CGT on digital downloads
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CGT on digital downloadsNew Zealand introduced goods and services (GST) tax obligations on foreign suppliers of electronic services to domestic consumers, or, as it is being termed locally, a "Netflix tax’, on 1 October 2016. Under the regime, cross-border purchases by New Zealand residents of certain electronically supplied services became subject to goods and services tax (GST).

New Zealand GST Tax On Digital Downloads Regime

Following the changes, non-resident businesses were required to register for New Zealand GST and charge GST on their supplies to New Zealand resident customers if they supplied online gaming, gambling, video streaming, or music streaming services.

The changes were contained in the Taxation (Residential Land Withholding Tax, GST on Online Services and Student Loans) Bill, which was passed in Parliament on 10 May 2016.

According to guidance from the tax agency, a business must register for GST when its turnover exceeds the GST threshold: that is, if its sales exceeded NZD60,000 in the past 12 month, or if they expect their sales to be more than NZD60,000 in the next 12 months; the company renders services to consumers in New Zealand; and it supplies a "qualifying remote service."

The regime covers:

    • Supplies to digital content such as e-books, movies, TV shows, music, and online newspaper subscriptions;
    • Online supplies of games, apps, software, and software maintenance;
    • Webinars or distance learning courses;
    • Insurance services;
    • Gambling services;
    • Website design or publishing services; and
    • Legal, accounting, or consultancy services.

Related: New Zealand Goods and Service Tax: Treatment Of Directors’ Fees

Foreign suppliers providing electronic services to New Zealand consumers are obligated to collect and account for VAT on their supplies. GST is liable on supplies of remote services that are physically performed outside New Zealand when they are supplied to a New Zealand resident.

Business may ascertain the location of the consumer, for determining whether GST is payable, by using two pieces of non-conflicting evidence:

    • The customer's billing address;
    • The internet protocol (IP) address of the customer's device or another geolocation method;
    • Details of the bank account the customer uses for payment, or the billing address held by the bank;
    • Mobile country code of the international mobile subscriber identity stored on the subscriber identity module card;
    • Where the customer's fixed land line is supplied; or
    • Other relevant information.

GST applies at the 15% rate when remote services are physically performed outside New Zealand and supplied to a New Zealand-resident consumer.

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