‘Netflix Tax’: GST on online purchases from 1st October

Date: 31st August 2016

Changes are afoot for those purchasing online services such as e-books, TV streaming, music and video downloads. Dubbed ‘Netflix tax’ , from October 1st 2016, overseas businesses providing online services to New Zealanders will need to collect and pay GST, if their cumulative sales are expected to be over $60,000 per annum.

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GST on online services for consumers

The price of consumer online services may increase 15% on the 1st of October, depending on whether service providers choose to pass on the increased cost to consumers. For example, we recently received this message from Skype:

In order to meet recent changes to New Zealand tax requirements, Skype will be required to include the Goods and Services Tax (GST) for customers in New Zealand.

From 1st Oct‍ober 20‍16, Skype will start charging the New Zealand GST rate of 15% on all purchases of Skype paid products.

Different rules for businesses

For NZ resident businesses using online services, such as Facebook advertising and Skype calls, the rules are different. You won’t be charged GST on these supplies, if:

  • you are GST-registered
  • the supplies are part of your taxable activity, and
  • you let the non-resident supplier know you’re GST registered and provide your New Zealand GST registration number or business number.

Non-resident suppliers don’t have to give you a tax invoice and you can’t claim back any incorrectly charged GST in your GST return, except where the supplier treats your business as an individual customer and charges you GST by mistake. If that happens, you contact the supplier who either refunds the amount to you or issues a tax invoice for you to claim the refund on your GST return. You can only obtain a tax invoice when the supply is less than $1,000. So it’s just easier to let the supplier know upfront.

Have questions?

Please feel free to get in touch if you have any questions or need help with your GST settings in Xero.

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Posted in: Alexandra, Latest News, Queenstown, Wanaka