Goods and Service Tax (“GST”)
Outside the EU most countries have a form of GST, which is a value-added tax levied on most goods and services sold for domestic consumption. The GST is paid by consumers, but it is remitted to the government by the businesses selling the goods and services.
As your e-commerce business grows and you penetrate new markets, it’s likely that you will need to register for GST/VAT in foreign countries as your sales exceed the distance selling thresholds.
Here we summarise the GST implications of trading in some key markets, along with details of the resident accountants that can help you, with whom we have partnerships.
United States of America
GST in the USA is governed at State level. You could liken it to having to file separate returns in the UK for each county, each with different rules, rates and timetables. It’s not hard to see that GST in the USA is a minefield.
The USA uses the concept of tax nexus. Nexus is a connection or business presence in a state or jurisdiction. There is no specific shared definition of nexus across the 50 states. Moreover, definitions and rules for determining nexus change constantly, and most states are careful to give themselves room to manoeuvre in their definitions. This means that a business must look at each state individually when determining sales tax nexus and must stay constantly on top of a slew of changing regulations and interpretations.
Marketplace facilitator laws in some States require businesses like Amazon and Etsy to collect and remit sales tax on behalf of their vendors. If all your USA sales are through a marketplace there will now be many States where no registration is required, although some states require you to retain an exemption certificate, administered by the state Department of Revenue and filled out by the marketplace.
The distance selling threshold for Australia is AUD$75,000. It’s worth noting that similar to registering for VAT in the UK, it isn’t the case that you should register for GST when your Australian sales have exceeded AUD $75,000 but when you forecast them to. For example, if you’ve turned over AUD$50,000 in 3 months, you’ll probably need to register.
Another consideration if you’re trading in Australia is that it may be in your interest to form an Australian subsidiary rather than registering your UK company for Australian GST.
At Elver Consultancy we have a partnership with The Ecommerce Accountant, a firm of chartered accountants based in Gold Coast, Australia, headed up by Reuben Bergola. They can be contacted by email firstname.lastname@example.org or call (07) 5504 1999.
In New Zealand non resident business have to register and account for GST on sales to consumers at 15% if their annual turnover is $60,000 (NZD) or greater in the last 12 months, or turnover is expected to be more than $60,000 in the next 12 months.
There is however no GST on sales to GST-registered New Zealand businesses. To confirm if your customer is a New Zealand resident you’ll need to check you have two non-conflicting pieces of evidence that indicate the recipient of the service is a New Zealand resident. You can use as evidence:
• the person’s billing address
• the internet protocol (IP) address of the device used by the person or another geolocation method
• the person’s bank details, including the account the person uses for payment or the billing address held by the bank
• the mobile country code of the international mobile subscriber identity stored on the subscriber identity module (SIM) card used by the person
• the location of the customer’s fixed land line through which the service is supplied to them
• any other commercially relevant information.
Sellers should treat New Zealand resident customers as not registered for GST unless the customer states they are GST-registered, or provides their GST registration number or a New Zealand business number.
The frequency of returns depends upon your volume of business:
|$500,000 to $24m||Two monthly|
|Below $500,000||Six monthly|
There are two types of registration, depending upon whether you maintain inventory in New Zealand or your products are supplied remotely. If you maintain inventory in New Zealand you will be able to reclaim GST on your costs, but a remote seller will simply account for GST on their sales.
Elevation Chartered Accountants can assist non resident businesses with their GST registration and ongoing compliance. They can be contacted via Elver E-Commerce or directly by emailing email@example.com.