Chapter 4 – Place of supply of specific telecommunications services

• OECD Guidelines
• Supplies received in New Zealand
• Supplies received outside New Zealand

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.

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.