Exporting changes your tax position in several directions at once, and the errors tend to cluster in three areas: GST treatment, double taxation, and pricing between related entities.
GST on exports
Exported goods are generally zero-rated — GST applies at zero percent, which means you charge nothing on the sale but can still claim input tax on your costs. That is a genuine benefit and it is conditional.
Zero-rating typically requires that the goods are exported within a defined period and that you hold documentary evidence of export. Keep it: shipping documents, export entries, bills of lading.
Where the conditions are not met, the supply may be treated as standard-rated and you become liable for GST you never charged.
Exported services have their own rules, generally turning on whether the recipient is outside New Zealand and whether the service relates to land or goods situated here. The distinction is not always intuitive, and services performed for an overseas client but relating to New Zealand property may not zero-rate.
Being taxed twice, and avoiding it
Income earned overseas may be taxed in that country and again in New Zealand as part of worldwide income for a New Zealand resident.
Two mechanisms address this:
- Double tax agreements, which New Zealand has with a substantial number of trading partners. They allocate taxing rights, reduce withholding rates on dividends, interest and royalties, and define when a business is taxable in the other country.
- Foreign tax credits, which allow tax paid overseas to be credited against New Zealand tax on the same income, subject to limits.
The concept that matters most for exporters is permanent establishment. Selling into a country generally does not make you taxable there. Having a fixed place of business, or in some cases a dependent agent concluding contracts, can. Businesses that put a salesperson into an overseas market frequently create a tax presence without realising.
Withholding tax
Overseas customers may be required to withhold tax on certain payments to you — particularly royalties, interest and service fees. The rate depends on the country and any applicable double tax agreement.
Two practical points: build withholding into your pricing rather than discovering it when the payment arrives short, and obtain the documentation evidencing the tax withheld, because you need it to claim a credit.
Transfer pricing
Where you transact with related parties overseas — a subsidiary, a parent, a commonly owned entity — the pricing must be arm’s length: what independent parties would have agreed.
This applies to sales of goods, services, management fees, royalties and intra-group loans. Inland Revenue scrutinises arrangements that shift profit out of New Zealand.
For smaller businesses the obligation is proportionate but real. Keep documentation supporting how related-party prices were set, and be able to explain the basis. Simplification measures exist for smaller taxpayers and low-value services, which reduce the compliance burden where they apply.
Structure in the target market
Options range from selling directly from New Zealand, through an agent or distributor, to establishing a branch or subsidiary. Each has different tax consequences in both countries.
The tax outcome should not drive the commercial decision, and it should be understood before committing. Establishing an entity overseas creates ongoing compliance obligations in that jurisdiction that are frequently underestimated.
Currency
Foreign currency gains and losses have specific tax treatment, and the financial arrangements rules can apply to forward exchange contracts and foreign currency debt. The treatment does not always follow the accounting, so confirm the position where amounts are material.
Records
Exporters need to hold more than domestic businesses: export documentation for GST zero-rating, evidence of foreign tax paid, transfer pricing documentation, and customs records.
Retain them for the statutory period. Reconstructing export evidence years later during a review is difficult and the consequence of failing is the loss of zero-rating.
Inland Revenue publishes guidance on GST for exporters, double tax agreements and transfer pricing free at ird.govt.nz, and MFAT publishes market reports and trade agreement material. New Zealand Trade and Enterprise publishes exporter guidance.
General information only, not tax advice. International tax is specialised — take advice.
