“Amazon Tax” Special Report
Commonly referred to as the Amazon Tax, the new GST rules coming into effect from 1st December 2019, will see non-resident suppliers of “distantly taxable goods” whose total supplies to NZ consumers will exceed $60,000 per annum (or are expected to exceed this threshold), required to register for NZ GST. The new regime will, as appropriate, also apply to certain operators of electronic marketplaces and to redeliverers.
“Distantly taxable goods” is a term that refers to low value imported goods, which are items which have a value of $1,000 or less, common examples being books, sporting goods and small electronic items.
To assist with ensuring non-resident suppliers are compliant with the new rules, IR has now issued a Special Report (http://taxpolicy.ird.govt.nz/sites/default/files/2019-sr-gst-low-value-imported-goods.pdf), which provides early information on the new rules, and will be followed up with more detailed guidance in the September edition of the Taxpayer Information Bulletin. I have also been contacted already by a number of non-resident suppliers, who have directly received correspondence from IR with regard to the new rules, suggesting that they discuss the issue with their advisor to determine any forthcoming obligations.
To a large extent, the new rules are drafted on similar terms to the remote services regime (Netflix Tax) which came into effect from 1st October 2016 – the filing period (quarterly) is the same, supplies to GST registered businesses are excluded, and the basis for determining whether a supply is to a NZ based consumer uses an identical approach.
Non-resident suppliers, operators of electronic marketplaces and redeliverers will be able to register for the new regime from 1st September 2019. Take note in this regard, that when determining whether there is an obligation to register, all supplies to NZ based consumers need to be taken into account, which could include a mixture of remote services supplies and those of distantly taxable goods.
Compliance Cost Reduction Determination for Telecommunication Tools
IR has issued a draft Determination, ED0219, which considers the issue of an employees’ use of telecommunications tools and usage plans in their employment, and applies to scenarios where the employee is directly incurring the costs themselves (providing their own telecommunication tool and/or usage plan), and their employer then agrees to pay them a reimbursement in relation to the business use element of those costs.
The Determination is split into three parts:
- A Class A scenario where the telecommunication tools and/or usage plan are principally used by the employee in their employment; and they are also used privately;
- A Class B scenario where the telecommunication tools and/or usage plan where the employee is required to use telecommunications tools and/or the usage plan in their employment based on a business reason, and they are also used privately; and,
- A De Minimis Class scenario, where the two previous Class arrangements are effectively ignored, with the employer reimbursement being exempt income of the employee if the amount paid is no more than $5 per week, amounting to no more than $265 per year.
Should the De Minimis Class not apply, then it is proposed under the Determination, that for:
- Class A scenarios – 75% of the amount paid can be treated as exempt income of the employee, unless the employer is only reimbursing or paying an allowance based on 75% of the total bill amount paid by the employee, in which case the total payment will be considered exempt income of the employee.
- Class B scenarios – 25% of the amount paid can be treated as exempt income of the employee, unless the employer is only reimbursing or paying an allowance based on 25% of the total bill amount paid by the employee, in which case the total payment will be considered exempt income of the employee.
The deadline for comment on ED0219 is 20th September 2019.
SOP to Existing Tax Bill
You may have heard various commentators in the media recently, talking about the restrictive nature of the KiwiSaver early withdrawal rules, and the inability of someone who has a life-shortening congenital condition, to access their KiwiSaver funds to enable them to spend a reasonable portion of their adult life in retirement.
Accepting that this limitation is a real issue for a number of New Zealander’s, and therefore needs to be addressed sooner rather than later, the Minister of Commerce and Consumer Affairs has introduced a SOP to the present taxation Bill before the house, the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Bill (158-1), to remedy the deficiency in the present legislation.
The SOP proposes amendments to the KiwiSaver Act 2006, to allow a person who has a life-shortening congenital condition, to withdraw their savings early in order to spend a reasonable portion of their adult life in retirement. The SOP creates a new withdrawal category in the KiwiSaver Act for people with life-shortening congenital conditions. This new early withdrawal category allows those people to withdraw their savings before they are 65 for the purposes of retirement on the basis of sufficient medical evidence.
To give certainty to people with such conditions, there will be a set list of congenital life-shortening conditions named in regulations as qualifying for withdrawal. However, a person who has a (perhaps rare) congenital condition will still be able to apply for a withdrawal if they are able to provide medical evidence that they have a congenital condition that shortens their life below the age of 65.
The new rules will apply to both KiwiSaver schemes and complying funds.
The taxation Bill is currently before the FEC, with submissions on the Bill due no later than 4th September 2019.
