Get Ready for New Zealand’s New GST on Digital Services With Recurly
The New Zealand economy is one of the fastest growing in the world and is notable in a couple of ways. For example, according to the Ease of Doing Business Index for 2016, New Zealand ranks second overall out of 185 countries. The country has sizeable manufacturing and service sectors, and a highly efficient agricultural sector which accounts for approximately one-third of real expenditure GDP. Their economy depends heavily on international trade.
Given this dependency, it makes sense that the country would want to ensure that the ‘playing field’ was level for all participants. And so, beginning October 1, 2016, New Zealand started requiring non-resident digital services companies to register and collect a 15% GST from New Zealand customers. This new update to NZ GST tax rules aligns closely to the tax rules implemented in the European Union in 2015 and has widespread implications for businesses.
What change is occurring with NZ GST, and what companies does it affect?
Before October 1, only digital service companies in New Zealand charged GST to New Zealand customers, which created a competitive disadvantage since digital services companies outside of the country didn’t collect the tax. The new tax rule now applies to all digital service companies who conduct business that extends over NZ$60,000 in a 12-month period with New Zealand customers.
What constitutes digital services?
This pertains to digital media that a customer consumes electronically. Â These include:
Downloaded and online games
E-books
Online webinars
Download and streaming music and videos
Cloud computing, including software provided as a service (‘SaaS’)
Internet telephony (e.g. Skype)
Streaming television (e.g. Netflix)
What are the specifics?
Companies that conduct digital sales in New Zealand over NZ$60,000 in a 12-month period are required to register to collect GST. Once registered, they must collect a 15% GST on all digital sales. Similar to last year’s VAT rules in the European Union, businesses conducting B2C transactions and taxing GST on digital services are required to collect two pieces of evidence proving the customer resides in New Zealand. Business customers must be identified by a GST number and are exempt from the GST requirements.
Recurly Support for the New Zealand Digital Services GST Rules
If you're a business selling digital services to customers in New Zealand, then Recurly's latest update for New Zealand (NZ) GST for digital services has you covered. We’ve extended our New Zealand GST support to include customer location validation and GST number collection. To learn more, check out NZ GST or contact Recurly Support.