TAX • 4 APRIL 2024 • 1 MIN READ

What is ‘Netflix Tax’?

SECTIONS

What is ‘Netflix Tax’

How does it impact your business?

What is ‘Netflix Tax’

The landscape of taxation is ever-evolving, and New Zealand is no exception. With the rise of digital services and the global marketplace, the New Zealand government has implemented GST on remote services supplied to its residents by overseas businesses. It’s commonly known as the ‘Netflix Tax’.

Remote services are a service that, at the time of the performance of the service, has no necessary connection between (a) the place where the service is physically performed; and (b) the location of the recipient of the services”.

Some of the examples are:

supplies of digital content, such as e-books, movies, TV shows, music and online
newspaper subscriptions
online supplies of games, apps, software and software maintenance
webinars or distance learning courses
insurance services
gambling services
website design or publishing services
legal, accounting or consultancy services

How does it impact your business?

The purpose of the legislation is to affect consumers rather than businesses. It stipulates that international suppliers should consider a New Zealand resident to be unregistered for GST unless they have been given a GST number by the customer. This means a business supplying remote services to a New Zealand GST-registered business should not be charging them GST.

If your business is registered for GST, you must provide the supplier with your GST or IRD number to ensure you’re not inadvertently charged GST. In other words, this means you should be paying less to the oversea supplier as you’re not getting charged the extra 15%.

If a non-resident supplier inadvertently treats a GST-registered business as an individual consumer and charges the business GST, there are two solutions:

If the value is over $1,000:

The GST-registered recipient should seek a refund from the non-resident supplier;
They cannot claim the expense in their GST return.

If the value is NZ$1,000 (including GST) or less, based on the value of the supply in New Zealand dollars at the time of supply:

The supplier can choose to provide a tax invoice to the NZ business rather than issue a refund;
The supplier must provide a full tax invoice, even if the payment for the supply (including GST) is less than $50. The new "Taxable Supply Information" rules don’t apply;
Only with the full tax invoice, can the NZ business make an expense claim in their GST returns to get the GST back.

Understanding the nuances of GST can help small businesses owners navigate the tax landscape more effectively and stay compliant. For other GST guides for small businesses, including registration, record-keeping, and tax invoicing, head to our resource library to read more.