VAT registrations are often regarded as a must for companies that provide taxable supplies within a country. But what if your business doesn’t necessarily make any sales in a country? How does the registration process apply to you, and what happens...
VAT registrations are often regarded as a must for companies that provide taxable supplies within a country. But what if your business doesn’t necessarily make any sales in a country? How does the registration process apply to you, and what happens to all the GST (goods and services tax) incurred on business-related expenses? To better understand registration requirements and how it relates to your business, it’s essential to first look at GST and how it influences your business.
In this piece, we’re looking at how foreign GST registration in New Zealand can benefit non-resident businesses that aren’t necessarily making any sales in New Zealand. This includes deep diving into unique GST reclaim potential, challenges, best practices, and how VAT IT can streamline the process to help you to efficiently navigate the administrative process while maximizing refunds and staying compliant.
Let’s start with the basics. Goods and services tax (GST) is a consumption tax charged on most supplies of goods and services in New Zealand at a rate of 15% - including most imported goods. In a nutshell, GST is the equivalent of what many other countries refer to as Value-Added Tax (VAT).
Let’s start with the fundamentals - why would GST registration in New Zealand be relevant to a business that does not sell in the country or have a fixed establishment there? Well, if you have business expenses in New Zealand, you have most likely incurred GST on those invoices and costs, which you may be eligible to claim rightfully. However, not without a few requirements - one being foreign registration.
Here’s the deal on registering for claim-only GST in New Zealand and how the process can help elevate your finances while staying 100% compliant with local laws and regulations.
In brief, Section 54B of the Goods and Services Tax Act of New Zealand grants non-resident businesses the opportunity to register for GST and subsequently recover the GST incurred on goods and services acquired in New Zealand. However, the process hinges on whether or not your business qualifies to register for section 54B. A business may have to register under the standard registration provision if it cannot meet the criteria.
The eligibility requirements include the following core standards:
With expert guidance and support from VAT IT, you can replace the burden of managing registration and claim processes and dive straight into the many advantages that registering for section 54B GST offers non-resident businesses. So, why are overseas claimants biased toward the GST system in New Zealand? Here’s a look at the top benefits.
Recover GST input: The most apparent benefit is that section 54B GST allows non-residents to recover GST without making supplies to end consumers in New Zealand, nor do they need a physical presence in the country.
Zero tax representative: Unlike similar schemes in other countries, New Zealand does not require non-resident claimants to appoint a local tax representative. This eases the administrative burden and helps businesses save additional time and money.
Eligible expenses: In an increasingly competitive marketplace, businesses constantly look for ways to improve their bottom line while providing competitive pricing structures. Due to the broad scope of deductible expenses, New Zealand quickly becomes the ideal pick for overseas claimants looking to conduct once-off events. However, claiming GST on business expenses can quickly feel daunting, especially considering strict compliance requirements and the administrative pressure of successfully navigating the GST landscape.
To ease some of the burdens, here are the most essential steps required to claim back GST on New Zealand business expenses as an overseas business claimant.
Granted that your business meets the eligibility requirements mentioned above, the process will generally involve the following steps.
Identify and confirm non-resident status
The first step will be establishing and determining your non-resident status in New Zealand. This will determine whether or not you are eligible to register for either standard GST (domestic VAT) or Section 54B (foreign VAT). Your non-resident status will hinge on whether or not your business has a fixed establishment in New Zealand and whether or not you provide taxable goods and services to end-users in New Zealand.
The registration process
The registration process for non-resident businesses generally involves close communication with the Inland Revenue Department (IRD). Eligible applicants can then continue to submit their application via the IRD website or by completing a paper application. Upon submission, the applicant will undergo a thorough evaluation to ensure they meet the eligibility criteria.
Despite businesses dedicating valuable time and resources in preparation for their registration application, they often experience delays in the registration process due to common pitfalls and challenges. In addition, despite successful registration, claiming GST hinges on a company’s ability to understand and comply with niche rules and regulations. Without the proper guidance and help, common challenges might deplete resources and waste time. Such challenges might include the following.
Here are some common challenges that non-resident businesses face when registering and claiming GST in New Zealand.
Keeping up to date with GST rules and regulations
As with most things in the tax landscape, rules and regulations are complex and prone to change; for non-resident claimants, the challenges are no different. Since the introduction of section 54B, there have been significant legislative changes regarding supplies made by non-residents in New Zealand. This particularly relates to the supply of remote services and low-value goods. With these changes, more non-resident entities are subject to mandatory standard registration. Therefore, staying in the loop and aligned with the latest GST rules is critical to ensure your business is eligible and compliant within the scope of GST scope and has correctly interpreted and applied the rules.
The entire GST claim process hinges on complying with the relevant requirements. This includes correct invoicing instructions and record-keeping requirements. Non-resident businesses must keep all relevant and required records and documentation, including proof of payment, original taxable supply information and after-purchases to support their claims. This may prove challenging, especially when operating remotely.
Because the GST process requires in-depth local knowledge of GST tax and terminology and communication with local tax authorities, some non-resident businesses may need help with language barriers and additional communication challenges due to different time zones.
We understand that the future can be unpredictable. Fortunately, so do the New Zealand tax authorities (Inland Revenue Department). If a non-resident business registered under section 54B wants to start making taxable supplies or becomes a part of a group of companies that are making taxable supplies in New Zealand, they must register under section 54A.
Section 54A includes businesses with GST potential and liabilities in New Zealand but no longer classified as non-resident entities. In the event that standard registration applies, your GST process will fall under Domestic VAT solutions and compliance.
Fortunately, at VAT IT, we provide Domestic VAT solutions in New Zealand to help companies administer their GST processes while maximizing recovery and ensuring consistent compliance.
Ultimately, your GST registration and reclaim processes shouldn’t feel foreign to you. This is why we want to give you our home-ground advantage. At VAT IT, we provide the perfect combination of state-of-the-art technology and human expertise to bring you the power duo of the decade.
Our in-house specialists and established partnerships with consultants across New Zealand facilitate the entire GST process on your behalf to provide a smooth, simple, and centralized solution for all your GST needs. This includes facilitating the registration process and relevant documentation and providing continuous filing solutions to ensure you’re compliant with all relevant deadlines and return dates.
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