Deemed Supplier Liability for Digital Platforms in New Zealand

Last year, the New Zealand government enacted the Taxation Act 2023, which introduced significant changes concerning indirect taxation of the Platform economy. The Taxation Act was passed on March 31, 2023, but most of its content related to reshaping the legal framework from the platform economy will be applicable starting from April 2024. 

The New Zealand government started with the implementation of the legal framework for the platform economy in 2016, when the GST Act, for the first time, addressed the tax liability of digital marketplaces for facilitating the supply of remote services. The scope of indirect tax liabilities of digital platforms was expanded for the second time in 2019. The GST Act introduced the deemed supplier model for digital marketplaces, facilitating the supply of low-value goods to domestic customers. 

The latest change of the GST Act adopted last year introduces the concept of a deemed supplier for digital marketplaces providing facilitation services, i.e., making it possible for underlying suppliers to offer “listed services” to local customers. 

The Taxation Act 2023 provides an exhaustive list of services and ancillary services connected with the principle one that could activate the GST reporting liability of the digital marketplace for the underlying supply. 

Timeline 

The amendments to the GST Act will come into effect starting from April 1, 2024. 

Impact on tax registration and reporting liabilities 

Starting from April 1, 2024, the digital marketplace should generally be considered from the tax perspective as the seller of the services indicated below when and only when these services are supplied to the recipient through the marketplace. If the supply is arranged and performed without the interference of the digital marketplace, then the supplier will carry out the tax responsibility. 

For the supply of the listed services, the digital marketplace should bear tax responsibility instead of the “actual seller”: 

• Ride-sharing and ride-hailing;
• Delivery services for beverages, food, or both;
• And  taxable accommodation services(excluding services that are GST exempt).

From the practical standpoint, this means that when the underlying supplier is registered or not registered to GST, operates through the GST-registered digital marketplace, and provides one or more of the listed services to end customers, the marketplace shall(if not arranged differently) be responsible for collecting and remitting GST to Inland Revenue.  

The deemed supplier concept covers both domestic and foreign digital marketplaces. The same goes for underlying suppliers; whether the underlying supplier is a local GST-registered or non-resident business doesn’t matter. 

When the threshold is reached, the digital marketplace should register for GST and, in general, carry out the reporting and remittance duty for all underlying suppliers providing their services(from the listed service list) to recipients in New Zealand. 

Of course, the listed service is of detrimental importance if it is performed, received, or provided in New Zealand. The GST rules can only be applied in that case. 

As mentioned above, there are specific situations when the GST registered underlying can opt out of this deemed supplier scheme and charge, collect, and remit output tax as its own responsibility. When this is agreed on a formal basis between the platform operator and the underlying supplier, the platform operator will be free of reporting responsibility for that underlying seller. The underlying seller will remit this output tax through its own GST return.