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Major change to GST zero-rating from 1 April

March 30, 2017


Partners Barney Cumberland, Stuart Hutchinson
Senior Associates Nick Bland, Paul Windeatt

Residential land tax

The GST treatment of New Zealand land related services supplied by technical, professional and other service providers to non-resident clients or customers, changes radically from 1 April 2017.

The current situation

This change will affect a number of sectors in which land related services are provided to non-residents. Obvious examples are engineers, architects, lawyers, accountants, real estate agents, surveyors, planners and valuers.

Under current law, invoices issued to offshore located non-resident clients for most technical, professional or other services are zero-rated for GST, including where the services relate to land in New Zealand.

This reflects the fact that the GST Act currently provides that New Zealand land related services supplied to non-residents are zero-rated unless they are supplied "directly in connection with" the relevant land. "Directly in connection with" has been interpreted by the courts as requiring that the services have a direct, physical effect on the land.

Building and construction services supplied to non-residents have a sufficiently direct connection to land to be standard-rated at 15% under current rules, but technical, professional and other services involving no physical interaction with land are not.

Why Inland Revenue is making this change

Inland Revenue has long considered that the way the current rules are interpreted runs counter to a key policy plank of a consumption tax such as GST, namely that almost by definition services relating to New Zealand land are "consumed" (and should be taxed) here. The 1 April change restores the "correct" policy outcome.

The situation from 1 April

From 1 April, invoices issued by technical, professional and other service providers to non-resident clients or customers must have GST added at 15% to the extent that the relevant services are supplied directly in connection with, or "are intended to enable or assist a change in the physical condition, ownership or other legal status" of, a particular piece of land (including improvements) in New Zealand.

The new, additional test is aimed at all services which are supplied with the intention of facilitating a change in the legal or physical nature of the land or improvement, but do not involve any actual physical interaction with the land.

Detailed guidance yet to be provided

Inland Revenue has not yet provided detailed guidance on what New Zealand land related services supplied to non-residents will (in its view) now be subject to GST at 15%. However, it is clear that the intention is to capture most such services.

The only New Zealand land related services that may continue to be zero-rated will be services of a general nature unrelated to a particular piece of land, such as advice concerning the New Zealand regulatory environment or trends in the real estate market. As soon as a specific piece of land or interest in land is under consideration or at issue, related services will be subject to GST at 15%.

What this means for you

Some practical points to keep in mind if you are affected are as follows:

  • in relation to ongoing engagements, check your terms of trade to ensure there is no contractual bar to increasing post-1 April fees by the standard-rate of GST (in the absence of a specific contractual bar, a general provision of the GST Act dealing with changes to the rate of GST applying to particular supplies should permit the price to be altered);
  • non-resident clients or customers will be unable to recover the GST charged, so the change brings about a real, net cost increase for them; and
  • where a blend of land-related and other services are supplied in a particular billing period, there may need to be an apportionment, where part of the invoice is standard-rated at 15%, and part zero-rated.


For further information please contact Barney, Stuart, Nick or Paul (contact links at top of article).