GST Zero-Rated Supplies
GST is a tax on consumption, therefore if something is not consumed in New Zealand, GST will not be collected on .Zero-rated supplies are subject to a GST rate of 0%. A person who makes zero-rated supplies is always in a favourable GST position. They charge 0% GST on supplies but can obtain a refund for GST paid on relevant inputs. This is different from GST exempt suppliers who cannot charge GST or claim an input deduction.
The following supplies of goods are zero-rated:
1) Duty-free goods
Goods purchased from duty-free shops by international travellers are zero-rated when a retailer:
- Sells goods to a tourist and arranges to send the items overseas to them
- Arranges to send the items to an overseas customer
- Arranges or arranges to send goods to the airport for a traveller to pick up at the time of departure.
Goods sold by duty-free shops that are licensed as export warehouses and that operate within the Customs processing area at international airports are also zero-rated, although GST may be payable to Customs upon entry to New Zealand. (If the traveller brings the good into New Zealand, it is taxable on GST.)
2) Exported goods
Exported goods qualify for a zero rating as they will not be consumed in NZ.
Exported Goods include:
- Items valued at less than $1000 that do not need an export entry also qualify as long as you can prove that they are to be or have been exported.
- Stores supplied to aircraft and ships for use outside New Zealand.
If you have entered goods for export, they must be exported within 28 days of the time of supply, unless IRD has agreed to an extension.
Goods that were to be exported but are destroyed, die or cease to exist owing to circumstances outside the control of both the supplier and recipient, will be zero-rated (s 11(1)(f)).
3) Certain exported services
Services performed outside New Zealand are zero-rated GST. Certain services performed in New Zealand are also free from GST, see below examples:
- Services supplied directly in connection with land or buildings located outside New Zealand. These may include architectural, real estate and legal services. For example: A New Zealand architect designs a building to be constructed on an overseas property for an overseas client.
- Services performed directly in connection with goods situated outside New Zealand at the time the service is performed. For example: A New Zealand insurance company insures a vehicle that is located outside New Zealand.
- Services supplied to non-residents outside New Zealand at the time the service is supplied. For example: IBBZ accounting provides service for a foreign clients living in Australia.
- Information services provided directly in connection with moveable personal property. For example: Machines are brought into New Zealand from Germany for testing. The results of the testing are collected, analysed and sent back to Germany.
- Services performed directly in connection with goods that are, or will be, entered for export. For example: The inspection cost on exported goods.
- Services relating to copyrights, patents and so on, which apply outside New Zealand.
- Services performed under contract to a non-resident who is outside New Zealand, but provided to a third party who is in New Zealand, are not eligible for zero-rating. For example, A non-resident tour operator purchases accommodation from New Zealand hotels and incorporates them into travel packages for tours of New Zealand. The travel packages are then sold to non-resident tourists.
4) Certain financial services
Supplies of financial intermediation services may be zero-rated to recipients if they are
1) registered for GST, and
2) 75% or more of their supplies in a 12-month period are taxable supplies.
Supplies of financial services to recipients who do not meet these criteria must be treated as exempt supplies. To zero-rate these supplies taxpayer must elect in writing to IRD.
5) Supplies to foreign-based pleasure craft, consumable stores, temporally imports
Zero-Rating applies to:
Goods supplied for use on a foreign-based pleasure craft that cause or enable the craft to sail, or goods that ensure the safety of passengers and crew, can be zero-rated.
The supply of consumable stores for use outside New Zealand on foreign-based pleasure craft departing New Zealand can be zero-rated.
Consumable stores are those goods that passengers and crew on board intend to consume, and those necessary to operate or maintain the pleasure craft, including fuel and lubricants but excluding spare parts and equipment.
6) Internet sales to overseas customers
If a registered New Zealand-owned entity sells goods or services over the internet to people in New Zealand, they'll charge GST, at 15%.
If a New Zealand-owned entity sells goods or services over the internet to overseas customers, GST will generally be charged at the rate of 0%.
Notice: If a person who buys goods from overseas on the internet which are forwarded to them from overseas, the importation is charged with 15% GST.
7) The first sale of refined fine metal
When newly refined fine metal (gold, silver, platinum) is supplied by a refiner to a dealer as an investment item, it is a zero-rated supply
8) Transport of goods to and from New Zealand
For the transport of goods, zero-rated services include the international journey, and any transport within New Zealand (including loading and unloading costs), as long as it is part of the international transport and is supplied by the same person or agent.
The following services in relation to international transportation are also zero-rated:
- Insuring or arranging insurance
- Arranging the transport.
9) Land transactions
A GST-registered person must zero-rate a supply, if the supply wholly or partly includes land, and:
- is made to another registered person and
- the recipient acquires the goods with the intention of using them for making taxable supplies and
- it is not intended to be used as a principal place of residence by the recipient and any person associated with them.
In order to be a zero-rated supply, all the above conditions for zero-rating must be satisfied at the time of settlement of the transaction. If any of these conditions are not satisfied at the time of settlement, the supply must be taxed at 15%.
Leases for dwellings are excluded from this definition when:
- the supply is made periodically and
- 25% or less of the total amount is payable in advance or all at once.