New GST Rules for Accommodation and Transportation Services Provided by Digital Platforms

The Taxation Bill (Annual Rates for 2022-23, Platform Economy and Remedial Questions)

The recently introduced Taxation Bill (Annual Rates for 2022-2023, Platform Economics and Remedial Matters) focused primarily on the proposal to impose GST on fees charged by managed funds and KiwiSaver suppliers. This proposal was withdrawn from a later version of the bill. However, the bill still introduces a similar substantive proposal: imposing GST on accommodation and transportation services provided through certain digital platforms and requiring the platform provider (rather than the underlying provider) to account for the GST.


Digital platforms work by connecting buyers to suppliers. The services are provided to the buyer by the underlying supplier, the digital platform being an intermediary in the supply via its website or application.

Under current law, the application of GST depends on whether the underlying supplier is registered for GST or not. In many cases, the underlying suppliers – the owner of a holiday home for example – may not be GST registered if the value of what they supply falls below the threshold for GST registration of NZ$60,000. In this case, no GST applies.

The bill proposes to change this position by extending the existing GST e-marketplace rules to accommodation and certain transport services provided in New Zealand, from 1 April 2024. The bill proposes that digital platform operators will pay GST on supplies of “listed services” on behalf of underlying suppliers. The operator of the digital platform will be considered to be providing the services provided to buyers through their digital platforms, instead of the underlying suppliers.

“Listed services” are defined in the Bill as including a supply of accommodation services in New Zealand, a supply of transport services in New Zealand in the form of carpooling services and beverage delivery services and food, as well as other services that are closely related to these listed services.

Large commercial accommodation companies that list at least 2,000 nights of accommodation per year through a digital platform can enter into written agreements with operators to “opt out” of the proposed rules. These large commercial hosting providers would remain responsible for collecting and reimbursing GST on the hosting services they provide if they opt out.

The approach follows a similar rule already introduced which imposes GST on foreign suppliers of certain remote services (such as a Netflix subscription) or low value orders supplied to New Zealand consumers.

The impact on the underlying providers

Suppliers registered for GST will not be required to return GST as it will be collected and paid by the operator of the digital platform. GST-registered suppliers will, however, continue to claim GST on their costs in the usual manner (there will be a deemed zero-rated supply by the supplier to the operator of the digital platform, to facilitate the supplier’s continued recovery of GST ).

For underlying providers that are not registered for GST, the online platform operator will be required to charge 15% GST on the relevant services. These supplies are currently not subject to GST. Underlying suppliers that are not GST registered have two options to mitigate the cost of this new GST:

  • They can voluntarily register for GST, in which case they can recover GST on their fees; Where
  • They can remain unregistered, but get some relief through what is described as the “lump sum credit system”.

If the flat credit system is applied, GST is technically charged at 15%, but the digital platform operator would pay 6.5% to the taxman and must pay the remaining 8.5% to the underlying supplier. The effect of this arrangement is that the GST is effectively paid on a deemed net profit to the underlying supplier of approximately 44% of the charges for the service concerned.

A divergent approach

Previous submissions on the proposal (at the discussion paper stage) argued that imposing the GST as proposed would be inconsistent with the approach taken in other jurisdictions, where the emphasis was on implementing implementation of the OECD reporting and information exchange framework and on the use of the information obtained to enforce existing GST rules. New Zealand appears to be charting a somewhat independent path by imposing GST on digital platform providers, although other countries such as Canada have already imposed GST on short-term accommodation services.

Underlying suppliers who are below the GST registration threshold of NZ$60,000 are not subject to GST under current law. The proposal to impose GST on listed services, regardless of the registration status of the underlying supplier, creates a distinction between unregistered suppliers who provide listed services via digital platforms (who will become subject to GST ) and unregistered suppliers who provide these types of services directly to purchasers (which remain GST exempt).

The Regulatory Impact Statement: Taxation of the gig and sharing economy: GST (RIS) justifies the imposition of GST on unregistered underlying providers on the grounds that, collectively, digital platform operators facilitate considerable economic activity and are well positioned to account for GST on supplies made on their platforms. The GST is not required to pay where a supplier is below the NZ$60,000 threshold due to compliance cost concerns, and the argument is that these concerns do not apply where the GST is imposed on the operator of the digital platform rather than the underlying providers. Proposal collects GST and insulates non-registered suppliers from GST compliance. However, the proposal deviates from the business model used by digital platforms whereby it is the underlying vendors who deliver goods and services to buyers, not the digital platform itself. Sourcing through a digital platform will have the effect of depriving the underlying supplier of the benefit of the concession offered by the NZ$60,000 threshold.

The impact on consumers

The RIS assumes that, as the GST “will be fully passed on to consumers”, one consequence is that “the cost to consumers of purchases made through these digital platforms will increase by up to 15%”.

The cost of services acquired through Airbnb, Uber and Uber Eats could therefore increase due to the proposal. The introduction of such a proposal in a period of high inflation could be at the center of future debates on the bill.

Platform operators will also have potential costs to adapt their systems to these changes, such as facilitating lump sum credit repayment and identifying GST-registered and non-registered users. It is possible that these costs will also be passed on to consumers, further increasing prices.

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