Chapter 4 – Place of supply of specific telecommunications services


It is proposed that:

  • Specific telecommunications services supplied by residents would be subject to GST at 15% regardless of the consumer’s residency if, to receive the services, the recipient of the services needs to be in a specific location in New Zealand.
  • Specific telecommunications services would not be subject to GST even when supplied to a New Zealand resident, if to receive the services the recipient needs to be in a specific location outside New Zealand.
  • A new test for determining the place of supply of these specific telecommunications services replace the existing test based on the location of the person initiating the supply.

4.1 Some telecommunications services require the recipient of the services to be in a specific location to receive the services. For example, a person using wi-fi at an internet cafe needs to be at that cafe to receive the wi-fi services. For these types of telecommunications services, we do not consider the residency of the recipient of the services to be an appropriate proxy for determining the place the services are consumed. Instead we propose that the place of consumption for these telecommunications services be determined by the location that the services are received.

4.2 The current test for determining the place of supply of telecommunications services, based on the location of the person initiating the supply, may achieve the correct result for these specific telecommunications services. However, we do not propose keeping the “initiator test” for these telecommunications services. It may not always be clear who has initiated a supply of telecommunications services. Furthermore, determining the place of consumption based on where a service is initiated is unique to New Zealand’s GST. Therefore, we consider that repealing this test and developing a clearer test for the place of consumption of these specific telecommunications services is appropriate.

OECD Guidelines

4.3 As noted in chapter 2, the OECD’s International VAT/GST Guidelines recommend that for business-to-consumer supplies of services, the place of consumption should generally be determined by:

  • the consumer’s residency, in the case of remote services; and
  • the place where the service is performed, in the case of on-the-spot services.

4.4 However, the Guidelines also note that in some specific cases these proxies may not be appropriate for determining the place of consumption. The Guidelines mention the provision of wi-fi in an internet cafe or the use of a telephone booth to make a phone call as examples of remote services in which the consumer’s residency is not an appropriate proxy for determining the place of consumption. Instead the Guidelines note that, in the case of these telecommunications services, the actual location of the consumer is a more appropriate proxy for the place of consumption.

4.5 In line with the Guidelines, we consider that for specific telecommunications services which require the consumer to be in a specific place to receive the services (such as making a call from a phone booth), the place of consumption should be determined by the location of the consumer.

Supplies received in New Zealand

4.6 We propose that regardless of the residency of the recipient, a supply of telecommunications services by a resident supplier would be subject to GST at 15% if the supply requires the recipient to receive the services at a specific place in New Zealand. This generally aligns with the current GST treatment of these telecommunications services.

Example 10: Internet Cafe

Wi-Fi & Kai is an internet cafe located in Tauranga. They charge customers $5 an hour for access to wi-fi at the cafe. As customers need to be at Wi-Fi & Kai to receive the supply of wi-fi it will be subject to GST at the rate of 15% regardless of the residency of the cafe’s customers.

Example 11: Phone booth

Aneale, an Australian tourist in Wellington, uses a phone booth to make a call to a friend. Despite being a non-resident, Aneale would be charged GST at 15% on the supply of telecommunications services as he had to be at the phone booth in Wellington to receive the supply.

4.7 We do not anticipate many instances in which these specific telecommunications services could be supplied in a specific location in New Zealand by non-resident suppliers.

Supplies received outside New Zealand

4.8 We propose that regardless of the residency of the recipient, a supply of telecommunications services would not be subject to GST (or zero-rated) if the supply requires the recipient to receive the services at a specific place outside New Zealand. This also would generally align with the current treatment of these services.

Example 12: Telecommunication service received at a specific place outside New Zealand

Keava, a New Zealand resident, is staying at a hotel in Sydney. The hotel charges her for using the phone in her room to make an international call to her sister in Hamilton. Despite Keava being a New Zealand resident, the supply of telephone services would not be subject to GST as Keava had to be in her hotel in Sydney to receive the supply.