Overseas company operating in NZ, and GST

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mattwnz

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#113976 3-Feb-2013 17:47

I recently purchased a service from an online business. They had a dot NZ domain, a NZ looking phone number, their website was NZ branded, and they said they have a NZ location with a NZ based datacenter. However they do also say that they have offices around the world. I therefore presumed that they would be paying GST, and I could claim back the GST as it would be a business expensive. When I got the invoice, although it said it was in NZD and includes applicable taxes, when I requested an invoicce showing the GST breakdown required for claiming back GST, they said they couldn't provide one as they were an international business and don’t apply GST to services. This isn’t really that obvious, unless you look in the fine print of the terms to find out who owns the business. Although I would have thought that if they had a NZ location they would have to claim and pay GST. Anyone know the rules on this? It doesn't seem quite right to me, but perhaps it is all ok. The IRD website is a little bit vague on this sort of situation.

freitasm

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#755141 3-Feb-2013 18:00

If they have a registered New Zealand company then they will have to collect GST. What is the situation? Search the Companies website for the company details.

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Goosey

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#755153 3-Feb-2013 18:14

Was this for invisible services or actual goods? i.e. where was the goods shipped from if physical goods?
You say the invoice says 'includes applicable taxes'. Wouldnt this be their way of saying GST inclusive?
Your accountant (or yourself) can eaisly workout the GST on this invoice i.e. workout 15% of the total.

Is their tax number (or anything else that resembles a tax number from a different country) on the invoice?

mattwnz

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#755170 3-Feb-2013 18:44

freitasm: If they have a registered New Zealand company then they will have to collect GST. What is the situation? Search the Companies website for the company details.

It isn't a registered NZ comapny according to their t&c's but a company that looks to be registered in Asia. So I am guessing they don't have to pay GST. Also did a look on the NZ companies website and they aren't on it.

Gooseybhai: Was this for invisible services or actual goods? i.e. where was the goods shipped from if physical goods?
You say the invoice says 'includes applicable taxes'. Wouldnt this be their way of saying GST inclusive?
Your accountant (or yourself) can eaisly workout the GST on this invoice i.e. workout 15% of the total.

Is their tax number (or anything else that resembles a tax number from a different country) on the invoice?

It's an online service, so no actual physical goods provided. But they do claim to have a NZ datacentre thats stores data, and a NZ office. Not sure where their customer support is based, but probably not in NZ based on the times they relied. There is only a tax invoice number, but IRD/GST number. There isn't any company number either , just the legal name of the company on the bottom if the invoice, which don't say 'Limited' so it doesn't look to be a NZ registered company.

The use of the words 'inclusive of applicable taxes' though is quite confusing. But I believe I can only claim GST if it is a proper invoice from a GST registered company, otherwise I am claiming back money that has never been paid to the IRD.

Goosey

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#755202 3-Feb-2013 20:27

Agree. Have you checked with the ird regarding doing business with off shore companies?
Most likely a common question they may cover in their faq.

It might be beneficial if you asked them for advice before they ping you for something you didn't know.

mattwnz

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#755248 3-Feb-2013 22:08

Gooseybhai: Agree. Have you checked with the ird regarding doing business with off shore companies?
Most likely a common question they may cover in their faq.

It might be beneficial if you asked them for advice before they ping you for something you didn't know.

Thanks. I think the safe thing is for me not to claim for the GST, as they themselves have said they don't pay it to the IRD. But it is definitely something to check when you signup to use a company that may appear to be New Zealand owned and operated, that they are actually registered in NZ for GST. Not always easy to find out though if they trade under different names.

Kyanar

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#755305 4-Feb-2013 06:59

From memory though, if the service is provided in NZ (whether they are an NZ registered business or not) then they become liable for making GST payments. You yourself may also become liable for reverse GST (where you have to pay 15% of the price to the IRD yourself).

You are better off finding a wholly NZ or wholly overseas supplier to avoid the whole question.

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Goosey

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#755312 4-Feb-2013 07:32

http://www.ird.govt.nz/yoursituation-bus/bus-aust-nz/types-bus-act/ecomm/ecomm-inctax/business-australian-ecommerce-incometax.html

edit, the table below didnt paste too well... check the link.

The OECD released a final Technical Advisory Group report to Working Party No 1 in February 2001, on "Tax Treaty Characterisation Issues Arising from E-commerce" which explains the treatment of a variety of examples of e-commerce transactions.

The examples provided in the report for e-commerce transactions focus on distinguishing the consideration for payment, between:

business profits, and
the part of the treaty definition of "royalties" that deals with the payments for the use of, or the right to use, a copyright.

The examples have application "across borders" where NRWT may be payable. A number of them indicate the suggested treatment of payments via e-commerce for software and so on.
OECD example - digital product downloadIf a New Zealand resident downloads digital products for their own use or enjoyment from an offshore website, the essential consideration for the payment is considered to be to acquire the data in the form of a digital signal and not to obtain the copyright. This payment is not considered to be a royalty but a business profits payment.

However, if the New Zealand resident is a book publisher who downloads a digital picture to use in a publication, the consideration is payment to acquire the right to use the copyright, and would be a royalty subject to NRWT.
Income tax treatment of computer softwarePlease use the table below for the income tax treatment of overseas suppliers.

Type of transactionOverseas supplier with no NZ permanent establishmentSale of copyrighted article, eg shrink-wrap licence to use the software is not a right to use the copyright
Treated as business income, exempt from income tax in NZ
Multiple copies (eg pay a per user fee for the right to use, not distribute)
Treated as business income, exempt from income tax in NZ
Sale of a copyright right
Treated as business income, exempt from income tax in NZ
Licence of copyright right (eg royalties paid on reproduction or on installation by computer manufacturer. Licensee has the right to use the copyright).
Royalties subject to NRWT at 15% (may be lowered to 10% with DTA)
Lease of a program (eg monthly fee paid for right to use and receive upgrades)
Taxable income subject to non-resident contractors' tax (NRCT), formerly non-resident contractors' withholding tax (NRCWT)
Provision of services (eg supply of modified program or creation of new program).
Treated as business income. Subject to NRCT for those services performed in NZ but with a relevant DTA, income may be exempt.
Supply of know-how (eg expert travels to NZ to assist)
Treated as royalty subject to NRWT at 15% (may be lowered to 10% with DTA)

E-commerce intermediaries and servicesBasically the intermediary is anyone that facilitates different groups of buyers and sellers to be engaged in e-commerce (for example, internet service providers).

Types of services and products:

hosting services
internet connection services
technical services to set up e-commerce facilities
exchange platforms that bring together buyers and sellers.

IncomeSome examples of business income from businesses that use its services, products and facilities are:

commission fees
service fees
subscription fees
registration fees
advertising fees.

AssetsInternet service provider businesses have mainly the following assets:

personnel
know-how
physical assets, for example, computers and software.

Income tax liabilityThe e-commerce intermediary will be liable to income tax in New Zealand if its business operations are all carried out here. This is largely a question of fact and degree.

If a New Zealand tax resident's operations are all based on a server it owns which is based overseas, this may constitute a permanent establishment overseas which requires a calculation attributing profit to that country. However, worldwide income should still be returned for New Zealand tax purposes and a credit claimed for any foreign tax paid.

Date published: 26 Jun 2008