Non-resident suppliers GST registration IS
IR has issued draft interpretation statement PUB00354, titled “GST – Registration of non-residents under section 54B.”
For those of you that are not aware, section 54B provides a mechanism for those non-resident businesses who are not making supplies to end user consumers in New Zealand, but are incurring New Zealand GST costs for some reason (e.g. sending their team to New Zealand for a conference), to register for GST under a special regime to be able to recover the GST input tax paid.
The draft IS is a reasonable document in my view, to provide a basis understanding of the rules surrounding the eligibility of a non-resident to register under section 54B. The narrative walks the reader through the 7 requirements any prospective non-resident must satisfy before they are entitled to register under section 54B, provides several examples at each step, and a number of flow-charts throughout, to explain the content being discussed.
Some of the key take-aways in my opinion:
- It is really important to understand the contractual arrangement in play – exactly who is the recipient of the supply, where will the supply take place, and who has actually incurred the GST input tax.
- The first requirement is that the person is a non-resident as defined and just remember that the definition of ‘resident’ is wider for GST purposes than the income tax definition which most people are aware of.
- The recent introduction of the ‘distantly taxable goods’ and ‘remote services’ regimes has certainly reduced the number of non-residents who will be entitled to register under section 54B.
- If it is reasonably foreseeable that the end-user of any services provided by the non-resident will be in New Zealand, then I can tell you that it is also reasonably foreseeable that the non-resident will not be able to use section 54B to recover New Zealand GST costs.
- Section 54B is not a mechanism for your client to register for New Zealand GST in order to obtain a refund of New Zealand Customs GST levied on goods imported into New Zealand if the supply is to a New Zealand GST registered customer (the supply treated as made outside of New Zealand therefore by s.8(3)). Instead, your client will need to exercise s.8(4) with their customer and register for New Zealand GST under the standard regime.
PUB00354 concludes with a discussion on some administration issues – taxable periods, payment basis registration requirement, cessation adjustments etc.
If you would like to have your say, the deadline for comment is 12th March 2021.
GST and agency IS finalised
IR has issued IS 21/01, the finalised interpretation statement titled “GST and agency”.
The document explores the concept of whether a person is acting as an agent or as a principal for the purposes of the GST Act. In this regard, it is considered that there are two essential features in any agency relationship:
- Authority – the agent must be authorised to act on behalf of the principal to create/affect the legal relations between the principal and a third party, for the relevant supply.
- Consent – the agent and the principal must both have consented to the conferral of such authority on the agent.
It is considered that certain features will strongly support there being the existence of an agency relationship, including documentation, commission payments, property ownership (agent never obtains legal interest), assumption of risk (by the principal), contract enforceability (third party against principal), debt liability (agent has no exposure) and reimbursement (of agent for expenses).
The IS 21/01 commentary also suggests that the following features may support the existence of an agency relationship:
- Fiduciary obligations: fiduciary obligations may be owed by the agent to the principal.
- Tax: the parties account for tax in a way that is consistent with agency.
- Control: the principal has control over the agent.
- Use of property: the agent does not treat the principal’s goods as their own asset.
- Alteration of property: the agent does not alter/manipulate property obtained as agent.
- Sale price: the principal sets the sale price of goods.
- Notification of sale details: agent required to notify principal of sale price and customer identity.
- Separate funds: the agent keeps the principal’s money separate from its own.
- Appearance: the agent holds itself out as an agent.
The document is split into four parts, with the final part dedicated to providing worked examples which illustrate how to determine whether an agency relationship exists.
Management of New Zealand foreign trusts in myIR
From March 1st 2021, myIR will include a New Zealand foreign trust account. For those of you who look after foreign trusts for your clients, you will be able to:
- Manage account details online, including details of connected persons
- View previously provided NZFT information.
- File annual returns and make payments in myIR.
- Send messages to IR about an NZFT in myIR.
- Receive automatic reminders 20 days before the NZFT return is due.
- Register an IRD number then a “New Zealand foreign trust account” in myIR.
- Cease an NZFT registration.
You may have noted recently that your foreign trusts have been issued with New Zealand IRD numbers, and as a consequence they will no longer require a NZFT number.
Additional details on the new myIR feature can be obtained from IR’s website.
If you have any questions or would like a second opinion on any national or international tax issues, please contact me firstname.lastname@example.org