Low Value Goods

The Government is to close a loophole that gives offshore companies an advantage by not requiring them to collect GST on all goods sold to local consumers. The proposed date for these changes has been extended to 1st Dec 2019 to allow offshore vendors more time to register and set up their systems.

It is estimated the tightening of the GST system will collect approximately $126 million in revenue per year by 2022/23.

What is Proposed?

  • Offshore suppliers would be required to register, collect, and return New Zealand GST on goods valued below $1000 supplied to New Zealand consumers.
  • The rules would apply when the good is outside New Zealand at the time of supply and is delivered to a New Zealand address.
  • Offshore suppliers would be required to register when their total supplies of goods and services to New Zealand exceed $60,000 in a 12-month period. In certain circumstances, marketplaces and re-deliverers may also be required to register.
  • Tariffs and border cost recovery charges would be removed from goods valued below $1000.00.
  • The current processes for collecting GST and other duty at the border by Customs will continue to apply for goods valued over $1000.
  • The current border processes for managing risks in relation to imported goods, including biosecurity assessment, will remain in place.


What do other countries do?
Australia adopted an offshore supplier registration model for collecting GST on low-value imported goods from 1st July 2018.

Switzerland was also introducing an offshore supplier registration system for the collection of VAT on low-value goods from 1 January 2019.

The EU has announced plans to implement a system akin to an offshore supplier registration model for the collection of VAT by 2021.

Other countries such as the United Kingdom and Canada also have a de minimis that is significantly lower than New Zealand’s de minimis – the threshold at which revenue is collected.

 

How will the proposed changes affect consumers?

GST will be charged at the point of sale when the value of the goods is under $1000 NZD. In some cases consumers will pay more for their goods but in other cases goods will be cheaper because of the removal of Customs tariffs, border security fees and biosecurity cost recovery charges. Please note that Tobacco, Alcohol and fine metals will still have their duty tariffs in place.

Purchase

Current treatment

Proposed treatment

$50 t-shirt

Total cost of parcel: $50

Total cost of parcel: $57.50

No current charges at the border

$50 t-shirt + $7.50 GST

$300 jacket   

Total cost of parcel: $428.74

Total cost of parcel: $345

$300 jacket + $30 tariff (10% x $300)
+ $49.50 GST (15% x $330)
+ $49.24 border processing fee

$300 jacket + $45 GST

 

Business to Business supplies

The policy indicates that the new rules will only apply to sales made to NZ end consumers B2C and excludes Business to Business (B2B) however we note the following rules of convenience have been introduced to streamline the supplier’s processes.

  • Suppliers who primarily sell 50% of their goods by value to consumers (B2C) have the ability to elect to treat all supplies as B2C supplies and also charge GST on low value B2B supplies.
  • Suppliers will also have the ability to charge GST on High Value Goods (above $1000 NZD) as well as the low value goods if the total value of the items ($1000 NZD and under) sold to NZ consumers is 75% or more.
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