Digital Platforms & Platform Economy
The Taxation (Annual Rates for 2022-23, Platform Economy, and Remedial Matters) Bill (No2) (The Bill) proposes to implement an information reporting and exchange framework developed by OECD. These proposals will affect electronic marketplaces, such as Air BNB, Uber and the likes. GST already applies on “Remote Services (2016) “and “Low Value imported Goods (2019)”.
The Bill introduces rules that will require digital platform operators based in New Zealand to provide the Commissioner with information about Taxpayers that earn income on that platform if the income is earned from providing accommodation, personal services, vehicle rentals or the sale of goods. The Regime would commence in the 2024 calendar year with the first information reporting obligation (and exchange) in early 2025.
Furthermore, the Bill extends the application of electronic marketplace Rules to Listed Services which will include “Taxable Accommodation” and “Certain Transportation Services” provided in New Zealand from 01 April 2024.
Taxable Accommodation is accommodation which is taxable in New Zealand, such as short- stay accommodation, visitor accommodation, serviced accommodation, etc. Certain Transportation services are defined as ride sharing and beverage and food delivery services. Other services that are provided through an electronic marketplace and are closely connected with these services will be subject to GST at 15% if they are performed, provided or received in New Zealand.
The consequential effect of these proposals is that the operators of electronic marketplaces, whether based offshore or in New Zealand, would need to collect GST on these types of services where they are provided through electronic marketplaces.
The operator of the electronic marketplace through which the Listed Services are provided would be deemed to be the supplier of those services and will be required to impose GST at 15% to customers. As the rules shift the accountability for GST on the electronic marketplace, the underlying supplier (such as Uber Driver or Accommodation provider) will be deemed to provide zero rated supplies to the electronic market place operator. The consequence of these amendments is that the underlying supplier will no longer be required to account for GST on that supply, but if the supplier is GST registered they will still be able to claim GST inputs when making these taxable supplies.
The Bill also proposes a Flat Rate Credit Scheme which will work in situations where the underlying supplier of services is not GST registered. In such cases the operator of an electronic marketplace will receive an input tax credit equal to 8.5% of the value of the services, to offset against the output tax payable on that supply. The Electronic Market Place Operator will be required to pass this credit onto the underlying supplier.
The Bill provides for an opt out mechanism for Large Commercial Accommodation Enterprises such as hotels that provide accommodation through these electronic marketplaces, whereby the Large Commercial Accommodation Enterprise will continue to be responsible to account for GST and not the electronic marketplace. In order to qualify as a Large Commercial Accommodation Enterprise the enterprise will need to list at least 2000 nights of accommodation through the electronic market place in a year.
October 2022
