Chapter 2 – Tax invoice requirements
2.1 While tax invoices remain a useful tool both for Inland Revenue and businesses to ensure GST compliance and monitor refund claims, the standard requirements for invoices have not changed very much since 1986. Vast changes in business practices and the use of technology since then have given rise to a risk either of non-compliance with the legislation or excessive compliance costs on businesses, suggesting that a review of these requirements is needed.
2.2 As well as modern business practices, international developments make it timely to review GST invoicing requirements.
2.3 In other jurisdictions there is emerging interest in GST (or VAT) adopting some form of split-payment system where a vendor or an intermediary involved in an electronic payment can split the GST off from any payment to the vendor and remit the amount to the revenue authority.
2.4 The New Zealand and Australian governments are also working together to facilitate electronic invoicing (e-invoicing). These changes are intended to facilitate Trans-Tasman trade for small and medium businesses with an ABN or NZBN by allowing data exchange to be used in place of traditional invoices.
2.5 With e-invoicing, businesses will no longer need PDF or paper invoices that have to be scanned, posted or emailed, and entered manually. Instead, the suppliers’ and buyers’ finance systems will “speak” directly to each other, enabling faster delivery, processing and payment of invoices, helping save time and money.
2.6 As an integrity measure, the GST Act denies an input tax credit claim unless the supplier has provided the registered person making the claim with a tax invoice and the tax invoice is held by the registered person at the time of making the relevant GST return (see section 20(2)(a)).
2.7 To be a tax invoice, the GST Act requires that documents with consideration exceeding $1,000 must contain:
- the words “tax invoice” in a prominent place;
- the name and registration number of the supplier;
- the name and address of the recipient of the supply;
- the date of issue;
- a description of the goods and services supplied;
- the quantity or volume of the goods and services being supplied; and
- the amount of the tax and the pre-tax consideration or the tax-inclusive amount with a statement that it includes GST.
2.8 Invoices are not required if the consideration is under $50, and a slightly simplified form of tax invoice can be used where the consideration is between $50 and $1,000.
2.9 The Commissioner does have some authority not to require a tax invoice (section 24(6)). This is where the Commissioner is satisfied that “there are or will be sufficient records available to establish the particulars of any supply or class of supplies, and that it would be impractical to require that a tax invoice be issued.”
2.10 The authority not to require tax invoices to be issued may provide some flexibility in the use of invoices (for example, in allowing data exchange in place of a traditional invoice) but it is not a long-term solution. There is limited guidance about when it would be impractical to issue or obtain a tax invoice, as opposed to simply having relatively high compliance-costs.
2.11 It is proposed that a wider range of ordinary business-to-business information, predominantly electronic information, should be able to be used to support GST output tax and input tax. To achieve this, we are suggesting a number of changes to the GST Act requirements for tax invoices.
Required information on the tax invoice
2.12 The current requirement of the name and registration number of the supplier and the name and address of the recipient should remain as key requirements of a tax invoice. The former is needed to identify the taxpayer who supplies the goods and services and is therefore liable for the GST charged. The latter is needed to ensure that the correct person receives any corresponding input tax deduction.
2.13 The requirement to state the GST-exclusive amount of the consideration and the tax or the GST-inclusive amount of the consideration is necessary to identify that the supply has been subject to GST and therefore any related output or input tax.
2.14 On the other hand, the requirement to provide details of the quantity and volume of goods and services supplied could be removed.
2.15 The quantity and volume of goods and services would normally be found in commercial documents and so it seems unnecessary to have this as a set requirement in the GST legislation. There are already general tax record-keeping requirements in the legislation, and these should largely suffice when information is required to support the information in a GST return.
Use of electronic invoicing
2.16 With invoices now being largely electronically generated it would make sense to also remove the requirement that a “copied” invoice be marked as “copy only” since the requirement makes little sense in the electronic environment.
2.17 The requirement in section 20(2)(a) that the recipient seeking an input tax claim “hold” a tax invoice has been interpreted by some to suggest that, although hard-copy invoices are not required, a hard copy (for example, in PDF format) must be able to be downloaded. It is questionable whether this requirement is suitable for modern business practices and we are interested in views about whether the wording can be modified by, for example, requiring only that the information required to be kept on a tax invoice be retained.
Buyer-created tax invoices
2.18 With the tax system becoming increasingly automated, it seems unnecessary for taxpayers to obtain Inland Revenue approval to use buyer-created tax invoices. A key requirement of this approval is for the parties to demonstrate why it is preferable for the buyer to provide the invoice rather than the supplier. For example, in the dairy industry, this is likely to be because the buyer has better information about what is being purchased (including quantity and price) than the seller.
2.19 Rather than involving Inland Revenue, buyer-created invoices should be based on what is most appropriate for the businesses in question. However, for revenue integrity reasons some requirements should be retained, such as agreements:
- between the supplier and the recipient that the recipient should issue the tax invoice along with a shared understanding of the commercial reasons for this; and
- that both parties retain a copy of the buyer-created invoice (or the information required to produce the document).
2.20 In some circumstances, shared invoices will be used for more than one supply by more than one supplier. Section 24BA treats a shared invoice that meets the tax invoice requirements as a tax invoice, but only in the limited circumstances of the suppliers being part of the same group of companies or the shared invoice being a practical response to statutory requirements.
2.21 It is proposed that shared invoices should be able to be used in a wider range of circumstances. The proposed new requirements could include:
- An agreement between the relevant GST-registered parties that a shared invoice be used.
- Requiring the supplier that issues the invoice to retain all the information that would be required to be retained if a separate tax invoice were required for each supply.
- Requiring the underlying suppliers to hold the information relevant to their supplies. This seems reasonable given that the information would be generated from the underlying suppliers.
- Making clear that the underlying supplier would remain ultimately responsible for the GST, while otherwise allowing the supplier issuing the invoice to pay the tax as their agent.
Tax invoice related penalties
2.22 Knowledge offence penalties can arise if the supplier does not provide a recipient with a tax invoice within 28 days of a request to do so or if the supplier issues more than one tax invoice in relation to the same supply.
2.23 Deeming the issuing of more than one invoice to be an offence, in the same way as the “copy only” requirement, seems outdated for electronic transactions. Historically, the concern was not with issuing an invoice for the same supply more than once, but for claiming more than one input tax deduction in respect of a supply. It is therefore proposed that any penalty (which would generally be placed on the purchaser) be limited to multiple claims for the same supply.
Questions for submitters
- Do you agree with the proposals outlined in this chapter?
- Are there further proposals which should be developed that would simplify or enhance the tax invoice requirements, keeping in mind the likely impact on compliance costs and the implications for Inland Revenue in administering the tax system?
 This is consistent with the 2019 recommendation of the Government’s Tax Working Group, that the requirement for taxpayers to seek the approval of the Commissioner to issue buyer-created tax invoices be removed.