Accounting and Tax

GST and services connected with land

22 March 2019
2 min read

There has been a recent change relating to GST where services are provided to non-residents in connection with New Zealand based land.

Previously, if someone was supplying such services to a non-resident, who was outside New Zealand when these services were undertaken, they may have zero-rated those suppliers if those services were not directly in connection with land.

This covered a number of services as the concept of “directly in connection with land” was interpreted by the Inland Revenue Department relatively narrowly. Many services (including legal services to transact the sale of land) were deemed to not be directly in connection with land, and so were zero-rated.

Upon review, it was determined that this was too narrow and inconsistent with the overriding principle that the tax treatment concerning land should arise in the jurisdiction in which the land is. Consequently, the new GST rules will supplement the existing rules by widening the application to include services which are “intended to enable or assist a change in the physical condition, ownership, or other status of the land”.

As a result, many services which may have previously been zero-rated on the basis of not “being sufficiently connected with land” will now be subject to GST. Businesses which provide these services will need to understand how this will apply to them and adjust their invoicing accordingly. This will have a particular impact on lawyers and conveyancers who assist with the legal transfer of land, real estate agents for services provided in relation to property sales (including marketing), architects and surveyors.

It is important to note it includes services that are intended to impact the land as above, even if they don’t. For instance, if a sale falls through the service may still be subject to GST.

On the flipside, there will still be some services that are not going to be captured, as they may be sufficiently removed or are more general in nature. For instance, legal advice on what is required to buy property in New Zealand or some valuation services could be sufficiently removed.

Therefore, it is important to get some advice from your Findex adviser so you can understand how these changes will impact on your business and clients.