Foreign firms fall into line levying GST on online television, music and software

Netflix passed on the cost of GST in full to Kiwi subscribers in November, with price rises of between $2 and $2.50 a month.


Netflix passed on the cost of GST in full to Kiwi subscribers in November, with price rises of between $2 and $2.50 a month.

Most large foreign companies appear to be collecting GST on digital services they sell to New Zealanders, confounding the hopes of some consumers who hoped they wouldn’t play ball with the new law.  

A rule change that took effect in October, means foreign companies are supposed to add GST to the likes of internet television, streamed music,e-books and online computer games and software they that sell to Kiwi consumers from overseas.

The rule only applies if companies sell more than $60,000 of such services to New Zealanders each year.

There were doubts foreign firms would play ball, given Inland Revenue has no easy way to force compliance on companies that don’t have a presence in the country.

* Australian delay means NZ could move in tandem on GST, says Retail NZ
* Spotify put GST on its invoices when it was not collecting the tax

But Inland Revenue said 135 foreign companies had registered to levy GST, in accordance with the law change. 

They are known to include most of the companies most impacted by the change, including Netflix and online music company Spotify.

Spotify increased the price of its premium streamed music service by $2 in January, and now charges $14.99 a month. Netflix also increased its prices by between $2 and $2.50 in November to reflect the GST change.

Inland Revenue spokesman Baden Campbell, said the tax department hadn’t attempted to estimate how many foreign companies should have registered to collect the tax.   

Some companies were still registering, suggesting compliance was not yet universal.

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But PwC tax partner Geof​ Nightingale, said the level of compliance appeared high. “I would assume that inside the 135 are most of the ‘big names’ that account for a big volume of digital services.”

Inland Revenue has forecast the tax change will bring in about $40 million a year.   

The Australian government is set to delay a broader tax change that would oblige foreign companies to levy GST on both digital services and physical goods that they ship to Australians.

The law change – which is being closely watched by New Zealand officials and lobbyists – was due to take effect in July.

But a senate committee has recommended delaying it until July next year.

Retail NZ spokesman Greg Harford said on Thursday, that the delay would mean New Zealand and Australia could move in tandem to ensure GST was levied on all overseas internet shopping purchases.

But Nightingale believed the delay would take some heat off the New Zealand government to move quickly on the issue.

 – Stuff

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