BDO Know How August 2016: The Netflix Tax is Near
16 August 2016
From 1 October 2016, GST will be applied on all cross-border remote service transactions from offshore suppliers to New Zealand consumers. The ‘Netflix tax’ is designed to level the playing field for New Zealand based suppliers who are required to charge GST on similar services provided in New Zealand.
It is worth noting that this doesn’t apply to the online purchase of goods, so the New Zealand retailer is still at a disadvantage.
Remote service transactions are loosely defined as ‘a service where at the time of the performance of the service, there is no necessary connection between the physical location of the recipient and the place of physical performance.’ This means that the Netflix tax will apply to offshore consultancy, accounting and legal services, insurance, gambling, as well as digital services such as iTunes and Amazon purchases.
Supplies to NZ GST-registered recipients will be excluded, so offshore suppliers will not be required to account for GST on such supplies, and the NZ recipients would not have GST credits to claim. However, overseas suppliers will have the option to zero-rate remote services made to GST-registered recipients, and this would be useful if a supplier incurs New Zealand costs with GST that they wish to recover.
For assistance with the new GST rules, please contact your local BDO adviser.