Understanding GST and duty on imports and exports
Starting to import or export can be an exciting business venture, but it can also be quite complex. This article gives a broad outline of your responsibilities for sales tax and duties as an importer or exporter. However, because of the complex nature of importing and exporting, it’s best to use the services of a freight forwarder, customs broker or your accountant to help you work out the sales taxes and duties you’ll be required to pay and what GST you can claim back from the Inland Revenue Department.
When you import goods, you must make a statement to the New Zealand Customs Service (NZCS) declaring the type and quantity of the goods to ‘clear’ them. As part of this, you are normally required to pay duty, GST and levies.
The duty you’ll need to pay the NZCS will vary depending on what you are importing and possibly also on the country from which you are importing.
To find out the duty to be paid on goods you are importing, refer to the Working Tariff Document on the NZCS website. The document organises goods into categories. If you are, for example, importing silk fabrics, you can download a document titled ‘Textiles and textile articles’ and then search for the section on silk. This will detail the tariff as a percentage of the value of the goods.
For some imports, there is both a normal tariff and a preferential tariff. A preferential tariff applies to goods that have been produced or manufactured in a country that has a trade agreement with New Zealand. For further information on the countries and country groups that New Zealand has trade agreements with, see the Free Trade Agreement section at the end of this article or the NZCS website.
Once you have determined the tariff, you will want to make a note of this and the Customs number for the type of good, to pass on to whoever is clearing your imports.
For some goods, there can be extra levies to pay on top of the duty. These are called excise duties. For example, if you import alcoholic beverages, you will need to pay the Alcohol Liquor Advisory Council (ALAC) levy, which is set according to a beverage’s deemed or average alcohol content. The rates are payable per litre of beverage.
Import transaction fees
You’ll need to pay an import transaction fee of $25.30 on every import entry and import declaration of goods, and a $12.77 biosecurity risk screening levy, which is collected by NZCS on behalf of MAF Biosecurity New Zealand. Both these fees are collected at the time goods are cleared and any duty and/or GST is collected.
GST is payable on the customs value of the goods you import, as well as on the freight and insurance costs of getting the goods to New Zealand, and on any duties and levies you need to pay. As with all GST, if your business is registered for GST, you can claim it back in your business’s GST returns from the Inland Revenue Department.
The situation might arise where you pay duty on goods you have imported into New Zealand but then sell to an overseas customer. When this happens, you are entitled to claim back (or ‘drawback’) the duty and excise duty you have paid on those items from the NZCS. You do not drawback GST because you can claim this back in your GST return. To find more about applying for drawbacks, visit the NZCS website.
By law, you must provide NZCS with details of what you are exporting in an export entry. All entries must be cleared online before you’ll be allowed to export the goods.
Export entry fees
An export entry transaction fee of NZ$10.22 (GST inclusive) must be paid on every export entry when exporting goods under an approved Secure Exports Scheme (SES). When exporting goods outside an approved SES, an export entry transaction fee of NZ$14.56 (GST inclusive) must be paid on every export entry.
The SES aims to help exporters by minimising potential customs delays at international borders. A number of New Zealand businesses have already joined the SES as partners. In consultation with the NZCS, SES partners take steps to protect their goods against tampering, sabotage, or smuggling, from the point of packing to delivery to the port. In turn, their containers are given a customs-approved seal or marking, which shows the goods are under customs control and can be considered secure by overseas customs administrations. This generally means SES partners deal with less customs intervention when exporting. To find out more, visit the NZCS website.
GST and duty
Your invoices will be GST exclusive for export orders and there is no duty to pay to NZCS when exporting. However, be aware that whoever is receiving your goods will likely have to pay import duty and the local GST equivalent in sales tax when receiving your goods. You may wish to bear this in mind when setting your export selling price.
If your business will be storing imported or excisable goods (for example, a duty free shop selling tobacco and alcohol) that have not had duty paid on them, with the intention of exporting them, you will need to apply for a customs controlled area licence. If your application is approved, the annual licence fee for the first year is $2,812.50 (GST inclusive), and then $450.00 for each additional year if your total gross revenue from the sale of dutiable goods held in the customs controlled area does not exceed $200,000 in the most recently completed fiscal year. To find out how to apply for a Customs controlled area licence, visit the NZCS website.
Free Trade Agreements
Free Trade Agreements (FTAs) are agreements between two or more countries to adopt preferential trade terms between them for the purposes of boosting trade and encouraging economic growth. The agreement will outline terms with lower or no tariffs for identified goods crossing their respective borders and might (depending on the agreement) also extend to the flow of capital and labour. This means that the agreed zero or lower preferential trade duties will apply for identified goods and services, not the normal taxes and duties for trade between these countries – and this can affect the amount of taxes and duties you’ll need to pay.
New Zealand’s Free Trade Agreements
New Zealand is a signatory to FTAs with Australia, China, Chile, Hong Kong and the 10 ASEAN member countries -Malaysia, Thailand, Laos, Vietnam, Indonesia, Philippines, Singapore, Cambodia, Myanmar and Brunei Darussalam.
This means that trade terms with these countries will be set out in the respective trade agreements, and will vary from the standard terms applied to trade between other countries and New Zealand. If you trade with New Zealand’s free trade partners, you’ll need to find out what the preferential terms of the respective agreements are.
New Zealand is involved in discussion around FTAs with the US, Peru, Japan, South Korea, India, Russia, Kazakhstan, Belarus and the Gulf Cooperation Council, and trade terms with these countries will also vary once FTAs are signed and come into effect. If you trade with these countries, you’ll need to keep tabs on the progress of negotiations and the trade terms that are agreed.
- Before you commit to importing, read 10 tips before you import.
- Learn more about Import regulations for commercial importers.
- Find out what duty you will need to pay, if any, on your imports from the Working Tariff Document.
- Read more about customs requirements for imports into New Zealand and access the import section of the New Zealand Customs Service, or call 0800 428 786 for more information.
- Get advice from a recognised customs broker or freight forwarder or consider getting training from the Custom Brokers and Freight Forwarders Federation.
Content provided by The Small Business Company