App Publishing Business Tax Adviser - GST/zero-rated income tax etc

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Forums › Finance and wealth management › App Publishing Business Tax Adviser - GST/zero-rated income tax etc

seoras

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#318225 28-Dec-2024 14:33

I've searched these forums and found this topic has come up over the years but no one really had a great answer to it.

I have an NZ business that makes it's revenue almost entirely from Google and Apple Apps (App store, Play, Google Ads).

It's been a low earner since I incorporated a few years ago but at the start of this year it finally passed the GST revenue threshold and I've had to register it for GST.

The thing that's troubling me is that each time I file GST I get a nice lump sum back. I'm not paying GST, I'm getting paid back GST because I'm collecting none. I have no NZ customers.

That might be correct, and I've nothing to worry about, but I'd like confirmation that I'm not wrong in how I'm filing.

I believe the income the business gets is zero-rated as it arrives in the bank as international wire transfers directly from the likes of Apple Inc, Cupertino and not Apple NZ as one accountant I spoke to tried to convince me (he thought I should be docking GST from that).

There's the rub. The two accountants I've spoken to are more used to dealing with "regular" NZ businesses who have NZ customers and in that situation GST is much more obvious (both are family members, one specialises in business tax).

I've heard that calling up the IRD is a waste of time as they just tell you to find an accountant. There must be some support for specialised businesses here in NZ, no?

Are there any App publishers like me among you who know the ropes on this or can recommend an accountant who has experience with digital services (SAS) exported?

amanzi

Amanzi
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#3325354 28-Dec-2024 15:48

My gut feel is that you're doing everything right, but you should absolutely check this. In my experience, calling the IRD is not a waste of time (assuming you can get through) and they are happy to provide advice or point you in the right direction. But having your own accountant is the best option moving forward. I'd recommend getting a chartered accountant, or at least dealing with a firm that has a mix of skills. I also prefer using a firm that's close to you so that you can have in-person meetings if needed. Also, you didn't mention it, but I assume you've been filing your own income tax returns since incorporating? A good accountant will do this on your behalf and will help you claim additional business-related expenses.

Goosey

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#3325373 28-Dec-2024 16:57

You need to find an accountant. There’s plenty around!

ANglEAUT

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#3325643 28-Dec-2024 21:05

Goosey: You need to find an accountant. There’s plenty around!

Not a helpful comment at all. As per the OP, this was already done.

seoras: ...There's the rub. The two accountants I've spoken to are more used to dealing with "regular" NZ businesses who have NZ customers and in that situation GST is much more obvious (both are family members, one specialises in business tax). ...

Please keep this GZ community vibrant by contributing in a constructive & respectful manner.

tchart

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#3325652 28-Dec-2024 22:07

From IRD

AFAIK

NZ customers would be paying GST (included in the price) of any purchases to Google etc. So Google etc would be paying the GST not you. Googles payments to you would be zero rated for GST.

For ad revenue the customer isnt paying for anything so no GST on that either.

At least that’s the way I see it…

seoras

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Master Geek

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#3325972 29-Dec-2024 16:40

tchart: From IRD
AFAIK

NZ customers would be paying GST (included in the price) of any purchases to Google etc. So Google etc would be paying the GST not you. Googles payments to you would be zero rated for GST.

For ad revenue the customer isnt paying for anything so no GST on that either.

At least that’s the way I see it…

That was my understanding too but it just felt a bit odd that I'm getting handed back all GST I've paid due to the circumstances of my business income being zero rated.

When I brought that feeling up with the accountants in the family they didn't like it either but couldn't see any way around it. Asking them to explain why they thought I might be wrong was like asking a CPU to divide by zero!

Hence me looking for an accountant with experience in a case like this.

Yeah, plenty of accountants around but you wouldnt ask you GP to perform brain surgery. I need a specialist.

I'll give the IRD a call and check in with them first.

tchart

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#3325978 29-Dec-2024 16:56

Keep us updated please

JarrodM

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#3326011 29-Dec-2024 20:07

I’m an accountant but this is not tax advice etc.

You are required to register for GST if you are undertaking a taxable activity and your turnover is $60k or greater. Sounds like this is the case.

If we take the entirely digital part out and say you are producing physical products that are sold to overseas customers exclusively, all these sales are zero rated. But as you are conducting a taxable activity and producing taxable supplies you are entitled to claim gst on your input costs.

Going back to the digital side of things it would really depend on the remittance you receive from Google and Apple. As a few years ago the law changed and the App Store was required to remit the gst, so I would assume the supply from you to the store (ie for the cash that you receive) would then be zero rated, as it is a bit of a waste of time you returning gst then Apple/Google claiming it…

Gut feel is you’re doing nothing wrong.

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seoras

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#3326016 29-Dec-2024 20:38

JarrodM: I’m an accountant but this is not tax advice etc.

You are required to register for GST if you are undertaking a taxable activity and your turnover is $60k or greater. Sounds like this is the case.

If we take the entirely digital part out and say you are producing physical products that are sold to overseas customers exclusively, all these sales are zero rated. But as you are conducting a taxable activity and producing taxable supplies you are entitled to claim gst on your input costs.

Going back to the digital side of things it would really depend on the remittance you receive from Google and Apple. As a few years ago the law changed and the App Store was required to remit the gst, so I would assume the supply from you to the store (ie for the cash that you receive) would then be zero rated, as it is a bit of a waste of time you returning gst then Apple/Google claiming it…

Gut feel is you’re doing nothing wrong.

Apple/Google take a lot of stick for the 30%, which was unfair, but the newer 15% level for the small guy like me I feel is a bit of a bargain as they take care of all the local sales tax in ~160 countries worldwide as well as dealing with payments processors like Visa/Mastercard with their chargebacks, fraud, refunds, payment support etc.

So even if I do have users of my services that are in NZ (very few, most are in USA) then GST is charged for what I provide but it's all done by Apple/Google.

My input costs are digital services too. Amazon AWS for example which I pay GST on, which I now get back, is one example.

Thanks for chipping in Jarrod. I've found this thread has allowed me to relax a bit more over this festive period after being wound up by family on xmas day! Hopefully a wee chat with IRD can put it to rest.

JarrodM

969 posts

Ultimate Geek

#3326083 29-Dec-2024 22:18

No worries. Be careful with the claiming of digital services though…

The way it is supposed to work is if you provide an ird number to the provider they are supposed to zero rate the transaction, so there is no gst to return for them on the transaction and no gst to be claimed by you.
You need to refer to any invoices you receive to see if there has been gst charged, but the premise of the law / my understanding is that the GST collected by these providers is effectively “final” and no credit should be claimed (as either it is the final consumer paying the gst, or if a gst registered entity purchases the service it should be zero rated)

Lastly, I don’t believe Apple ask for any IRD numbers on the purchase side of things, and they just return gst on all App Store sales for nz based accounts, and the invoice that’s issued doesn’t have the gst details so technically gst should not be claimed on those expenses.

I am going to try enjoy my break from work now!

seoras

101 posts

Master Geek

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#3326121 30-Dec-2024 09:45

JarrodM: No worries. Be careful with the claiming of digital services though…

The way it is supposed to work is if you provide an ird number to the provider they are supposed to zero rate the transaction, so there is no gst to return for them on the transaction and no gst to be claimed by you.
You need to refer to any invoices you receive to see if there has been gst charged, but the premise of the law / my understanding is that the GST collected by these providers is effectively “final” and no credit should be claimed (as either it is the final consumer paying the gst, or if a gst registered entity purchases the service it should be zero rated)

Lastly, I don’t believe Apple ask for any IRD numbers on the purchase side of things, and they just return gst on all App Store sales for nz based accounts, and the invoice that’s issued doesn’t have the gst details so technically gst should not be claimed on those expenses.

I am going to try enjoy my break from work now!

Don't reply to this, enjoy your break! I'm adding this bit of info for the next person who searches these forums for info.

Most digital services providers do take my IRD number but do still charge GST (it's stated on their receipt) like Amazon AWS.

There's only one biz that I deal with that doesn't do this, OpenAI. They charge GST for their subscription but not for the use of their API. For the API they mark the receipt "Tax to be paid on reverse charge basis", which I believe means I'd need to pay the GST myself directly to IRD but since I'm getting it all back anyway, I don't. That would be a "zero rated" example I'd think.

So that's an interesting point you made about zero rating by digital service providers to me. When I registered for GST I went through each account and made sure they knew I was now GST registered in NZ thinking they would stop charging GST but they didnt. If I wasn't getting that GST back each month I probably wouldn't have this uneasy feeling about it. Re-checking those accounts I can see tax status is correctly setup.

After I call the IRD I'lll post a reply with what their take on it is.

Tzoi

424 posts

Ultimate Geek

#3326181 30-Dec-2024 13:13

Ex-nz tax advisor here (not tax advice etc.)

From what you've described, everything sounds fine on the basis that your contracts are with the overseas Google and Apple entities. You could possibly have voluntarily registered for GST earlier to claim back the GST before meeting the threshold.

seoras

101 posts

Master Geek

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#3339062 4-Feb-2025 12:21

I've now hired an accounting firm to advise and do the App company business tax.

They are comfortable with what I'm doing on the GST and have checked with the IRD.

I came across something interesting recently while I was looking for alternatives for PayPal on my website.

Paddle.com and Fastspring are two alternatives I was looking at. Paddle describes itself as a “Merchant of record”, which I’d never heard off before.

https://www.paddle.com/blog/what-is-merchant-of-record

That would also be a fair description of Apple's App Store and Google Play as they both handle the sales tax collection and filing.

Were as PayPal is just a "Payment Service Provider", according to Paddle.

It's a bit bizarre filing GST each month and getting money back every time but that seems to be just the nature of the business I am in!

Hope this followup proves to be of some use/comfort for anyone searching for an answer to this in future.