Page 86 - Export and Trade

Taxation

By Staples Rodway
Staples Rodway is New Zealand’s seventh largest accounting practice. It has over 400 staff nationwide with
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complications arising from being an exporter. www.staplesrodway.co.nz

Taxation issues for exporters GST/VAT. This can add a complication, as, unlike New
Becoming an exporter opens up a world of opportunity Zealand, overseas jurisdictions tend to have a myriad
for your business. Unfortunately, such an opportunity of exemptions and differing rates, particularly for items
also brings potential tax complications. However, with deemed necessities.
forward thinking and the right team of advisors, your Finally, a number of countries are tightening up their
business can successfully navigate those complications. rules around low value goods.
We outline below some of the areas that you need Australia, for instance, is planning to require offshore
to consider as an exporter. This is, of course, not a sellers of low value goods to account for Australian GST.
substitute for professional advice and our top tip for
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professional advisor. With cross border transactions comes the potential for
overseas income tax issues. The level of complication
Team approach is largely dependent on whether the other country has
Before considering the tax issues, the most important D 'RXEOH 7D[ $JUHHPHQW '7$ ZLWK 1HZ =HDODQG 1HZ
thing to remember is that you need to take a team Zealand currently has 40 DTAs, primarily with our major
approach. A good tax advisor in the other jurisdiction/s trading and investment partners.
that is able to help you navigate through the various 7KH ¿UVW LVVXH LV WKH OHYHO RI FRQQHFWLRQ WKDW \RXU
potential pitfalls is worth the fees that you will incur. business has in the other country. Each country has
Additionally, the overseas tax advisor should be in different rules in relation to the sort of connection that a
contact with your New Zealand tax advisor to work business needs before it is obliged to account for income
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solutions that will help manage the tax burden to your may not need to account for income tax and therefore do
business. not need to consider whether there is a DTA.
However, if your business has a connection that
GST/VAT may require it to account for income tax in the other
GST/VAT is one of the more obvious issues facing jurisdiction, then consideration of whether there is a
exporters, not only in relation to the GST treatment of DTA between New Zealand and the other country is
exports by Inland Revenue, but also in relation to the necessary. If there is a DTA, then for a business to be
GST/VAT treatment in the overseas jurisdiction. subject to income tax in the other country is dependent
Exports are generally zero-rated for New Zealand GST on whether they have a ‘permanent establishment’.
purposes. This means that your business charges a zero A permanent establishment may arise, for example,
percent rate of GST on exports, but can claim GST on where your business has a staff member in the other
any qualifying expenses. country that is conducting sales and concluding
In the event that your business becomes a major contracts. Determining whether a business has a
exporter, expect Inland Revenue scrutiny as you will permanent establishment is complex, especially with
often receive GST refunds. recent rule changes, and so you should seek professional
You will also need to consider the GST/VAT rules of the advice.
other country/countries, particularly around the charging Another area of tax that an export business needs
of GST/VAT at the border and the process by which this WR FRQVLGHU LV QRQ UHVLGHQW ZLWKKROGLQJ WD[ 15:7 D
amount can be claimed back. Depending on these rules, tax on interest, dividend and royalty payments. While
your business may need to register for and return foreign in many cases the business can claim the NRWT as a

84 NZ Export & Trade Handbook 2018