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Tourism is a vital part of New Zealand's economy, and the GST treatment of tourism-related goods and services has important implications for both businesses and international visitors. This article explains the key GST considerations for tourism operators and provides clarity on when zero-rating applies to services provided to tourists.

GST Basics for Tourism Businesses

Registration Requirements

Like other businesses, tourism operators must register for GST if their taxable supplies exceed (or are expected to exceed) NZ$60,000 in any 12-month period. For tourism businesses, taxable supplies include:

• Accommodation services
• Transport services
• Tours and experiences
• Retail sales to tourists
• Food and beverage services
• Booking and reservation services

Most established tourism businesses will exceed this threshold and need to register for GST.

Charging GST to Tourists

Once registered, tourism businesses must generally charge 15% GST on goods and services provided to tourists within New Zealand, regardless of whether the tourists are domestic or international. This means:

• GST is included in the price of accommodation, tours, and other services
• Tax invoices should be provided for business travelers who may be able to claim back GST in their home country
• Pricing should be clearly communicated as GST-inclusive to avoid confusion

However, there are important exceptions to this rule, particularly for services provided to tourists that are consumed outside New Zealand.

Zero-rating for Tourism Services

Services Consumed Outside New Zealand

Services that are physically performed outside New Zealand can be zero-rated (taxed at 0%). For tourism operators, this means:

• Tours or activities that take place entirely outside New Zealand's territorial waters or airspace can be zero-rated
• The portion of a tour package that takes place overseas can be zero-rated (with appropriate apportionment)
• Services related to transport to or from New Zealand may qualify for zero-rating

This ensures that New Zealand GST doesn't apply to services consumed outside the country.

International Transport

International transportation services are generally zero-rated for GST. This includes:

• International flights to and from New Zealand
• International sea transport to and from New Zealand
• Domestic legs of international journeys when sold as part of the international ticket
• Facilitation services directly connected with international transport

This zero-rating reflects the principle that transportation services are consumed where the travel occurs, which is partly outside New Zealand.

Arranging Services for Overseas Tourists

Agency services provided to overseas persons may be zero-rated if:

• The services are arranging the provision of goods or services in New Zealand
• The overseas person is outside New Zealand when the arranging services are performed
• The services are not directly in connection with land or moveable personal property in New Zealand

For example, an overseas travel agent booking New Zealand accommodations and activities for their clients may receive zero-rated services from a New Zealand inbound tour operator.

GST for Specific Tourism Sectors

Accommodation Providers

For hotels, motels, and other accommodation providers:

• GST at 15% applies to accommodation services provided in New Zealand
• Both short-term and long-term accommodation are generally subject to GST
• Deposits and cancellation fees are typically subject to GST
• Facilitation fees paid to online booking platforms are usually subject to GST

Accommodation providers should ensure their property management systems correctly calculate and account for GST on all bookings.

Tour Operators

Tour operators face some of the most complex GST issues in the tourism sector:

• Tours conducted entirely within New Zealand are subject to GST at 15%
• Tours that cross into international waters or to other countries may have portions that can be zero-rated
• Packages that combine taxable and zero-rated elements require apportionment
• Commission structures with suppliers and agents can create additional GST complexity

Maintaining detailed records of the components of each tour and their GST treatment is essential for compliance.

Transport Providers

For transport operators:

• Domestic transport is subject to GST at 15%
• International transport is zero-rated
• Transport that is part of an international journey may qualify for zero-rating under certain conditions
• Shuttle services to and from airports for international travelers are generally subject to GST

The zero-rating of international transport doesn't extend to purely domestic services, even if provided to international tourists.

Visitor Attractions and Activities

For providers of tourist attractions and activities:

• Attractions and activities within New Zealand are subject to GST at 15%
• Activities that take place in international waters (e.g., some fishing charters or cruises) may qualify for zero-rating
• Booking fees and commissions have their own GST treatment that may differ from the activity itself

Tourism Packages and GST

Package Tours

Many tourism businesses offer package deals that combine multiple elements. For GST purposes:

• Each element of the package should be assessed for its correct GST treatment
• The package price should be apportioned between zero-rated and standard-rated components
• The apportionment method should be fair and reasonable
• Documentation should clearly support the GST treatment applied

Common apportionment methods include:

• Based on the market value of each component
• Based on the cost of each component plus a consistent markup
• Based on time spent on each activity for tour packages

Inbound Tour Operators

Inbound tour operators (ITOs) who package New Zealand experiences for overseas visitors face particular GST challenges:

• Supplies to overseas travel agents may qualify for zero-rating as "arranging services"
• Services directly provided to tourists in New Zealand are generally subject to GST
• Determining whether they are acting as an agent or principal affects GST treatment
• Documentation of the exact nature of their services is crucial for correct GST treatment

GST Refunds for Tourists

No General Tourist Refund Scheme

Unlike some countries, New Zealand does not operate a general "tourist refund scheme" that allows visitors to claim back GST on purchases when they leave the country. This means:

• International tourists generally pay GST on goods and services consumed in New Zealand
• There is no mechanism at airports or ports for tourists to claim GST refunds
• This policy simplifies administration but means GST is embedded in the cost of tourism

Limited Exceptions

There are limited circumstances where tourists may effectively avoid paying New Zealand GST:

• Goods purchased by tourists that are exported by the retailer may qualify for zero-rating
• Business travelers may be able to claim New Zealand GST through their home country's GST/VAT system if there's a reciprocal arrangement
• Diplomats and representatives of certain international organizations may be entitled to GST refunds

GST on Tourism Marketing and Representation

Offshore Marketing

Tourism businesses often market their services internationally. For GST purposes:

• Services of offshore agents and representatives promoting New Zealand businesses to potential visitors may be subject to the reverse charge mechanism
• Advertising placed in overseas media is generally zero-rated
• Participation in overseas trade shows may involve complex GST treatment depending on the specific services received

Tourism Industry Association Memberships

Membership in tourism industry associations:

• Is generally subject to GST at 15%
• Can be claimed as an input tax credit if the business is GST-registered and the membership relates to taxable activities

GST for Online Travel Agencies and Booking Platforms

Commission-Based Models

For online travel agencies (OTAs) operating on a commission model:

• New Zealand suppliers (hotels, activity providers, etc.) generally charge GST on the full consumer price
• The OTA's commission is typically subject to GST if the OTA is New Zealand-based
• If the OTA is overseas, the commission may be subject to the reverse charge mechanism for GST-registered suppliers

Merchant Model

Under the merchant model, where the OTA purchases inventory and resells it:

• The OTA makes a taxable supply to the customer and must charge GST if registered
• The supplier makes a taxable supply to the OTA and charges GST on their wholesale rate
• Overseas OTAs making supplies to New Zealand consumers may need to register for GST if they exceed the registration threshold

GST Compliance for Tourism Businesses

Record Keeping

Tourism businesses should maintain detailed records including:

• Evidence supporting zero-rating (e.g., documentation of services performed outside New Zealand)
• Calculations for apportioning packages between zero-rated and standard-rated components
• Tax invoices for all expenses on which GST input tax is claimed
• Contracts with overseas agents and partners that clarify the nature of services provided

Tax Invoices

For supplies over $50, tourism businesses must provide tax invoices that include:

• The words "Tax Invoice" prominently displayed
• The supplier's name and GST number
• The recipient's name and address
• Date of issue
• Description of the goods or services
• The amount of GST charged or a statement that GST is included
• The total amount payable

For zero-rated supplies, the tax invoice should indicate that GST has been charged at 0%.

Seasonal Fluctuations

Many tourism businesses experience significant seasonal fluctuations. For GST purposes:

• Consider the filing frequency that best suits your cash flow (monthly, two-monthly, or six-monthly)
• Plan for GST payments during peak periods
• Remember that GST is calculated based on when the time of supply occurs, not necessarily when payment is received

GST and M─üori Tourism

M─üori tourism experiences are an important part of New Zealand's tourism offering and have the same basic GST rules as other tourism services. However, there are some specific considerations:

• Cultural performances and experiences on marae may have specific GST treatment depending on the entity structure
• Some M─üori trusts and authorities have special tax status that may affect GST
• Activities that involve educational components may have different GST treatment than purely entertainment activities

Operators of M─üori tourism experiences should consult with tax advisors familiar with both GST rules and the specific structures used in M─üori organizations.

GST and Sharing Economy Tourism

Short-term Accommodation

For providers of short-term accommodation through platforms like Airbnb:

• GST registration is required if taxable supplies exceed $60,000 in any 12-month period
• All accommodation services in New Zealand are subject to GST if the provider is registered
• Platform fees paid to overseas platforms may be subject to the reverse charge mechanism
• GST adjustments may be required for mixed-use assets (e.g., holiday homes used privately and for short-term rental)

Ride-sharing and Experiences

For providers of ride-sharing services or experiences through platforms:

• Services provided within New Zealand are subject to GST if the provider is registered
• The platform may handle GST collection and remittance in some cases
• Providers should understand whether they or the platform is responsible for GST

Impact of COVID-19 on Tourism GST

The COVID-19 pandemic significantly affected tourism businesses and raised specific GST issues:

• Cancelled bookings and refunds may require GST adjustments
• Deposits retained for cancellations generally remain subject to GST
• Pivoting to domestic tourism may affect previously zero-rated services
• Businesses that fell below the registration threshold due to reduced activity had to consider whether to deregister

As international tourism recovers, businesses should ensure their GST systems are updated to correctly handle the return of international visitors.

Common GST Pitfalls for Tourism Businesses

Misclassifying Zero-rated Services

A common error is incorrectly zero-rating services that are consumed in New Zealand. Remember:

• Services physically performed in New Zealand are generally standard-rated at 15%
• The nationality or residence of the customer doesn't automatically determine GST treatment
• Zero-rating typically requires specific statutory criteria to be met

Agency vs. Principal Issues

Tourism businesses often struggle with determining whether they're acting as an agent or principal, which affects GST treatment:

• Agents typically account for GST only on their commission
• Principals account for GST on the full supply price
• The contractual relationships and how services are marketed are key factors

Time of Supply Rules

Tourism services are often booked and paid for well in advance of the actual service. Remember:

• GST is generally triggered at the earlier of invoice or payment
• Deposits can create a time of supply even before the service is provided
• This can create cash flow challenges if GST must be paid to Inland Revenue before the service is delivered

Conclusion

GST compliance for tourism businesses involves navigating complex rules around zero-rating, international services, and package tours. By understanding the specific GST rules that apply to tourism services, businesses can ensure they charge and account for GST correctly while maximizing legitimate input tax claims.

As New Zealand's tourism industry continues to evolve, particularly with the growth of online booking platforms and the sharing economy, staying informed about GST obligations is essential for both compliance and business success. Tourism operators should consider consulting with tax advisors who specialize in the tourism sector to ensure their specific circumstances are properly addressed.

Remember that while GST considerations are important, they should be integrated into overall business strategies rather than driving them. Focusing on delivering exceptional experiences to visitors while maintaining proper GST compliance will support both individual businesses and New Zealand's tourism reputation.