The Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Bill (No 2)
The Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Bill (No 2) has been introduced. Key highlights of the bill:
- Collecting GST on accommodation and transportation services provided through electronic marketplaces.
a. In 2016, New Zealand’s GST rules were amended to require operators of electronic marketplaces to collect GST on cross-border services purchased by New Zealand resident consumers. This is when companies like Netflix, Google etc started collecting the GST from NZ consumers. The rules for electronic marketplaces were subsequently extended in 2019 to apply to certain imported goods received in New Zealand. This change made overseas operators to register as non-resident service provider and GST base was extended.
b. Short term accommodation provider and ride share providers to be included in the reforms. The Bill proposes to extend the electronic marketplace rules to taxable accommodation and certain transportation services provided in New Zealand from 1 April 2024. The effect of this extension is that operators of electronic marketplaces – whether based offshore or in New Zealand – would need to start collecting GST on these types of services where they are provided through an electronic marketplace. It seems the change would be targeting operators like Air Bnb and ride share companies.
c. A permitted deduction on a flat line rate is proposed. The Bill proposes that operators of electronic marketplaces would be required to take a deduction of the GST payable to Inland Revenue on supplies of accommodation and transportation services that are made through electronic marketplaces by persons who are not registered for GST. This deduction, which is proposed to be 8.5% of the value of the services
d. Dominant use of assets would enable the GST refund on the purchase of assets. The bill allows GST-registered businesses to elect to treat certain assets that have mainly private or exempt use, such as dwellings, as if they only had private or exempt use. Introduce a simple principal purpose test for assets acquired for $10,000 or less. If these assets are principally acquired for business purposes, the GST registered business would be able to claim a full GST input tax deduction, rather than applying the apportionment rules.
e. Cross-border workers reform, the IRD recognise more and more people are working in cross-border, thus NRCT (non-resident contractor tax rules) to be aligned with time. New changes would simplify approach to the schedular payment withholding thresholds and introduce a 60-day grace period, similar to that proposed for PAYE, FBT, and ESCT. NRCT exemptions would be broadened, including permitting a 92-day retroactive period. Finally, the proposals would allow a non-resident contractor to nominate a New Zealand resident taxpayer to establish a good compliance history for exemption purposes.
f. Perhaps a welcome news for people using public transport. The Bill proposes a fringe benefit tax exemption for public transport. The exemption would cover fares on bus, train, ferry, tram, or cable car services subsidised by an employer mainly for the purpose of their employee travelling between their home and place of work.
*The above article is a high-level explanation of the methods of calculation, and there may be other technicalities/rules that are applicable. The complexity of the calculations can also vary. Please reach out to us if you have specific questions regarding your situation.
Please note that the above does not constitute specific tax advice and only intends to be a general advice. If you require specific advice related to your situation, please reach out to our tax consultant using the ‘contact us’ option.
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