Tax & Accounting Blog

Electronic Services, the GST and ANZ

Blog, Indirect Tax, VAT Tax Rates, VAT-GST Management February 12, 2016

Australia and New Zealand are both moving forward to tax electronic services from overseas to generate tax revenue and create a level playing field. New Zealand introduced the changes to the taxation laws last year and will look to have GST charged to consumers on October 1 2016. Australia’s legislation was introduced on on February 10 and will have the GST charged on July 1 2017, which has led to a week of articles about the “Netflix Tax” coming to Australia.

Both jurisdictions define the services broader than the European Union’s changes which were limited to Telecommunications, Broadcasting and Electronic services. New Zealand describes new services caught in the tax net as “remote services:

Remote services are those where there is no necessary connection between the physical location of the customer and the place where the services are performed. These “remote” services include both digital services (such as internet downloads and online services) and more traditional services (such as legal and accounting services that are supplied remotely).”

This broader application of electronic services reflect the view on electronic services from the OECD. The OECD has a set of guidelines regarding when countries have the right to tax certain transactions and the guidelines state the correct tax location is the consumer’s usual location. The obvious impact of these changes will be the application of the GST on Netlfix bills in Australia and New Zealand. However, the broader application could impact other types of services which people might not traditionally consider electronic services such legal and accounting services.