Loan Intermediary Services: New Zealand

Abstract

New Zealand has a broad-based GST system with very few exemptions. One of the few exemptions is the supply of financial services, which includes what would generally be regarded as loan intermediary services. New Zealand’s financial services exemption is broad in the sense that it covers both explicit and implicit fees and is not confined to services supplied by financial institutions. Since 2005 suppliers of financial services, including loan intermediation services, have been able to zero-rate their supplies to certain GST-registered recipients. The changes were intended to integrate the supply of financial services more fully into the GST system by taxing such supplies (albeit at the rate of zero per cent) and thereby allowing financial service providers to deduct input tax in respect of those supplies. As a result, tax cascading and the self-supply bias have been reduced for these business-to-business supplies. At the same time, imported services received by financial institutions were made taxable through the introduction of a reverse charge.