It may be one of the more mundane parts of doing business but goods and services tax is a necessary evil, particularly with new online tax rules coming into effect.
The taxation of goods and services purchased online is becoming more of a worldwide issue with Kiwis due to pay goods and services tax (GST) on online services bought overseas possibly as soon as Christmas.
Australia will also be bringing in tax on goods and services bought overseas and online from July 2017.
Deloitte partner Allan Bullot said this was relevant for many fast-growing companies, like those in Deloitte's Fast 50 programme, that were either exporting or thinking of exporting.
They needed to understand local tax laws of countries they exported to as well as what tax overseas customers would be paying.
"If you're thinking about actively going into a market due to a price advantage, you need to be sure you have that [advantage]," he said.
Considerations included whether companies would have to pay local sales tax in the markets they were going into and whether the products or services would be inclusive or exclusive of GST when sold.
"Just expecting it to be exactly like it is at home has caught out a lot of businesses," Bullot said.
"It can be a very costly mistake. If you have a 10 per cent growth margin and then discover it's 15 per cent GST, you're now in a loss, which can be difficult to explain particularly if it's loss that didn't need to be there."
He recommended getting advice from NZ Trade and Enterprise or an accountant to better understand overseas tax laws.
Founder of ExportX Paul Grey, has helped companies export to large markets since 2008 and said tax regimes were one of many things acting as barriers to markets like the US and Europe.
As well as being expensive and time-consuming to register for GST overseas, it was also confusing.
Grey said in the United Kingdom there were some categories of goods and services that attracted value-added tax (VAT) and others that did not while in Canada there were three levels of tax with different provinces having different tax regimes.
The US used sales and use tax, which was a "whole different beast" and made conversations difficult as it was different from the concept of GST or VAT, Grey said.
"Coming from New Zealand where we have clean, well organised GST, it's not a good starting point for going into markets where there's all these weird and wonderful variations," he said.
Exporting aside, having good accounting functions from the get-go saves companies time and money.
"You're less likely to have GST errors arrive and should Inland Revenue select you for investigation and consideration of an audit, you're far more likely to be able to show them you're a good taxpayer who cares about GST," Deloitte's Bullot said.
Other issues for all businesses included:
- Knowing GST thresholds and the correct way to file GST returns for each of those thresholds.
- Knowing how to deal with non-standard GST transactions. A small business might not be aware that if their company van was crashed into, they would have an obligation to pay GST on their insurance payout, for example.
- Claiming GST on accounts payables supplier invoices as soon as possible: Bullot said an invoice filed in September, for example, could be claimed in a company's August GST returns if the invoice was dated in August, subject to some exceptions. This is opposed to waiting and subsequently having to change accounting records later as businesses owners could make those adjustments earlier.
Article from stuff.co.nz by Tao Lin
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