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LAWCOMM 403 long notes.docx
LAWCOMM_403_long_notes.docx
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LAWCOMM 403 long notes.docx-CONTENTS Tips ...........
LAWCOMM_403_long_notes.docx-CONTENTS Tips ......................................................................................................................................................................................... 4 Introducon ............................................................................................................................................................................
LAWCOMM 403 long notes.docx-CONTENT...
LAWCOMM_403_long_notes.docx-CONTENTS Tips ......................................................................................................................................................................................... 4 Introducon ............................................................................................................................................................................
Page 149
o
The supply of residenal accommodaon (not commercial, industrial or retail accommodaon – these are
zero-rated instead)
GST registered persons who supply exempt supplies do not charge GST and cannot claim input tax credits (so they bear
the costs of GST) – they are completely out of the GST system
Example of exempt supply
o
ABC Ltd is a merchant bank; its only acvity is to raise money on the wholesale market and lend it to NZ
businesses.
o
Lending money is a supply of a service, but it is an exempt supply of a “financial service” under s 14(a) and s
3(1)(f). When ABC Ltd borrows it pays no input tax - and it charges no output tax when it lends the money. ABC
Ltd is not carrying on a taxable acvity and cannot be registered for GST. However, ABC will be incurring other
costs which will be GST inclusive; eg, rent on its offices, power, phone accounts etc. These input taxes cannot
be deducted and will not be refunded by the IRD.
ZERO-RATED SUPPLIES
In comparison with other jurisdicons New Zealand has a relavely narrow range of supplies that fall outside the GST
net
Policy reasons for the zero rang of exported goods and services:
o
The possible double taxaon of goods and services traded between New Zealand and overseas countries
o
Consumpon of some goods and services are most likely to take place outside New Zealand
o
For convenience
o
For an-abuse of the GST rules
Some examples of zero-rated supplies include:
o
Goods exported by a supplier
o
Goods which are outside New Zealand at the me of supply delivered to a customer who is outside New
Zealand
o
The compulsory zero rang of land
o
A supply of a going concern
Zero-rated suppliers are sll entled to input tax credits
SUPPLY OF A GOING CONCERN – SALE AND PURCHASE OF A BUSINESS
Anything done in connecon with the beginning or ending of a taxable acvity is treated as being carried out in the
course or furtherance of that taxable acvity
o
This means that the sale of a business would ordinarily give rise to a taxable supply by the vendors
o
It is however possible for the vendor and purchaser to treat such a supply as the supply of a going concern and
zero rate the supply
11
Zero-rang of goods
(1)
A supply of goods that is chargeable with tax under secon 8 must be charged at the rate of 0% in the following
situaons:
…
(m)
the supply to a registered person of a taxable acvity, or part of a taxable acvity, that is a going concern at the
me of the supply, if—
(i)
the supplier and the recipient agree that the supply is the supply of a going concern, and their agreement is
recorded in a document; and
(ii)
the supplier and the recipient intend that the supply is of a taxable acvity, or part of a taxable acvity, that
is capable of being carried on as a going concern by the recipient; or
In order to zero-rate a going concern, you need:
o
An agreement in wring for the supply to be a supply of a going concern
o
The recipient must be a registered person
o
The recipient must be in a posion where the business or (if part of the business is sold) that part of the
business will be carried on or operated in the same way
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