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Thread ID: 80557	2007-06-27 11:45:00	GST apportioning on split transaction, part overseas	Billy T (70)	PC World Chat

Post ID	Timestamp	Content	User
563456	2007-06-27 11:45:00	Hi Team I have struck an interesting GST question . I act as a service agent for an Australian company and I service and calibrate their products throughout NZ . Every now and then one of these machines must return to Australia for reconditioning, and I have a spare unit here (supplied and owned by the manufacturer) that I rent to the client while their machine is away . In the current instance, rental charges will be, say, $3000, of which I would retain $1000 as a commission and also to cover incidental costs . I would forward the other $2000 to the manufacturer in Oz . As I see it, I am obliged to invoice the client for $3000 +GST for the rental, but when I forward the net $2000 to Oz, I will end up paying $375 GST to IRD on income of just $1000 . I would prefer not to have clients aware that I receive a commission (I look after their interests in other ways), and I don't think the transaction could be zero rated for two thirds of the price because the service is delivered and charged here in NZ . One option could be to deduct the GST from their payment and have them claim it back from NZ but that seems rather too complicated to me and goodwill is important . I could ask my accountant, and probably will, but it is worth a punt to ask the diverse brains-trust of PF1 to see if anybody here has experienced a similar situation . There could be a commercial tax lawyer lurking in the background for all we know . Cheers Billy 8-{) :confused:	Billy T (70)
563457	2007-06-27 12:53:00	You cannot get around this unless you set up a company in Australia as well, and pay your tax based on transfer pricing regulations. It probably won't be worth it.	techie (7177)
563458	2007-06-27 20:42:00	I think I might have had a blonde moment there . The excess GST should be refunded when I submit my next return because taxable income will not equate with GST paid . Correct me if I am wrong (again) . Cheers Billy 8-{) :blush:	Billy T (70)
563459	2007-06-27 22:01:00	Refund, what refund? I think you have the wrong idea of what the IRD is all about :) Your accountant should advise as he'll be in the spotlight when you ever get called on it. Wouldn't the payment to the Aust company be subject to some sort of tax whether withholding or GST that would account for any difference?	PaulD (232)
563460	2007-06-27 22:03:00	I wrote to IRD with a related question regarding "mixed NZ/Overseas services". After 18 months with no reply, I rang them. After getting the run-around for ages I finally got a verbal response, followed by a letter referring to my written request, almost 2 years after the written request. My accountant was only able to advise me at the time to seek clarification from the IRD. I wish you luck...	godfather (25)
563461	2007-06-27 22:31:00	I don't think the transaction is that complicated. Effectively I am "renting" the machine from the Australian company for $2000 and charging my customer $3000. payment to Australia is like any other transaction and they are responsible for any taxes at their end. Our IRD wouldn't be interested in that at all. My "net income" on the transaction is $1000 +GST of $125, but my gross income shown against the rental is $3000 plus GST so I have to pay $375 to IRD. We file regular GST returns and if in any month we pay more GST than we collect, we get a refund (or credit, doesn't matter which) and when the wheel turns, eventually we will receive more GST than we pay so we send IRD a cheque for the difference. Having seen the light, this rental is no different to the latter example, so we just pay the $375 and in due course I will see the $250 balanced out in our monthly GST returns. I've been in business for 14 years, have been through a routine IRD tax audit, and my Accountant has never found any problems with our book-keeping so I'm pretty sure it will all work out just fine. As I said, it was a blonde moment. Cheers Billy 8-{)	Billy T (70)
563462	2007-06-28 01:00:00	Effectively I am "renting" the machine from the Australian company for $2000 and charging my customer $3000 . payment to Australia is like any other transaction and they are responsible for any taxes at their end . Our IRD wouldn't be interested in that at all . Why wouldn't the IRD be interested? You are just the same as your client, you are both renting the use of the machine in NZ . Why should the client pay GST and not vou? As the agent for the Australian company perhaps the IRD expects you to invoice yourself for $2000 +GST cancelling the excess .	PaulD (232)
563463	2007-06-28 01:43:00	I would have considered that you are exporting a $2000 "service" to the overseas company in facilitating a lease of their equipment in NZ . In providing that "service" there is a separate locally based income of $1000 . The provision of the "service" to the overseas company would be zero rated (assuming the company does not have a NZ based office) . The provision of the local rental service is GST rated as normal . Or have I missed the point?	godfather (25)
563464	2007-06-28 02:09:00	The point is that Billy isn't exporting a "service" he's exporting $2000. If it was a $2000 payment for the licence to use software in the machine the IRD seem to have that specifically covered in that GST is payable.	PaulD (232)
563465	2007-06-28 02:23:00	Let me clear this up . GST needs to be paid to IRD/received from customer based on total 'revenue' - accountants treat the word 'income' as having multiple meanings, including EBIT - so should not really be used as it is vague . You will charge the customer 3000 + 12 . 5% GST of $3000 = $3375 . This means that you pay the IRD $375 for the GST that you have charged the customer . It does not matter how much money you actually make . The $2000 you simply put into your accounts as being a cost of the business . You cannot claim any GST back on this as it is considered 'zero-rated' . That is exactly how you will have to do it unless you have a 'sister' business in Australia, or the company that you pay rent to has a business registered locally in New Zealand .	techie (7177)
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