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New Zealand's approach to taxing low value goods

New Zealand GST low value goods

Since December 1, 2019, non-resident businesses selling low value goods to consumers in New Zealand need to apply, collect and remit GST (at the standard rate of 15%) on these sales to New Zealand’s Inland Revenue Department (IRD). 

The IRD defines a low value good as “a physical good valued at NZ$1,000 or less, excluding GST”. The value needs to be looked at on a per item basis and not per consignment.

The rules differ slightly from their neighbours in Australia. In Australia, where the new rules on low value goods were introduced in July 2018, the value of AUD1,000 is looked at per consignment.

The rules for sales above AUD1,000 also have not changed in Australia and the liability remains with the customer upon delivery of the goods. In New Zealand non-resident businesses can choose to charge GST on goods valued above NZD1,000 supplied to consumers in New Zealand if either:

  • 75% or more of the total value of the goods consists of those individually valued at NZD1,000 or less

Or 

  • Approval has been given by New Zealand’s IRD.

New Zealand GST on low value goods: online marketplaces impact

These changes apply to non-resident businesses that sell directly to New Zealand consumers online, by phone or by mail order; to online marketplaces that other people or businesses sell items through; to businesses offering mailbox redelivery of low-value goods, and to personal shopping services from countries other than New Zealand.

The rules impact online marketplaces as they are now liable to collect and remit GST on sales of low value goods supplied through their platform.

An online marketplace is defined by New Zealand’s IRD as “an electronic platform, like a website, app or internet portal, that overseas businesses use to market and sell their goods and services.”

This means that online marketplaces must now have very specific knowledge of the type of goods (and the value) sold on their platforms. 

For context businesses must remember that GST was introduced back in 1986. Of course, online commerce did not exist then and the new amendments are back for a broader approach to future-proof the New Zealand taxation system. 

These amendments are also introduced to level the playing field between non-resident and domestic businesses. Prior to these GST rule changes non-resident businesses did not have the obligation to apply GST on their sales to New Zealand-based consumers while domestic businesses did. It is this loophole that the New Zealand tax authorities (and others across the world) are attempting to close with these legislative amendments.

Mirroring global implementations

These rules in New Zealand mirror ones recently introduced on VAT collection on the cross-border sale of low-value goods in Norway, Australia, the UK (from January 1, 2021) and - from July 1, 2021- in the European Union (EU). 

The relevant thresholds in these jurisdictions are as follows: Norway (circa NZD500), Australia (circa NZD1,080), UK (circa NZD270) and EU (circa NZD270). It also follows the recommendation in the OECD report on the role of digital platforms on collection of VAT published in 2019.

PLEASE REMEMBER THAT THIS INFORMATION HAS BEEN PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND IS NOT PRESENTED AS SPECIFIC TAX OR LEGAL ADVICE. ALWAYS CONSULT A QUALIFIED TAX OR LEGAL ADVISOR BEFORE TAKING ANY ACTION BASED ON THIS INFORMATION. VERTEX INC. ACCEPTS NO LIABILITY FOR ANY LOSS RESULTING FROM ANY PERSON ACTING OR REFRAINING FROM ACTION AS A RESULT OF THIS INFORMATION.