New Zealand GST Rules for Payment Service Providers

April 28, 2026

Updated Apr 28, 2026

New Zealand GST Rules for Payment Service Providers

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New Zealand's Inland Revenue published an interpretation statement explaining how GST should be applied to businesses that provide payment-related services to merchants, such as payment service providers (PSPs), buy now, pay later (BNPL) providers, and other payment technology or infrastructure suppliers. The main purpose of this interpretation statement is to clarify the criteria for determining whether such activities constitute exempt financial services under the GST framework.

Key Determining Factor for GST Purposes

Financial services are typically exempt from GST, or, in some cases, subject to a 0% GST rate. In either case, the supplier does not charge GST on the supply made to the merchant. However, one factor significantly changes the treatment of these transactions. The key factor for determining whether a transaction is subject to GST revolves around whether the provider delivers settlement services.

For example, if authorising and executing payments, ensuring funds are transferred, and bearing the risk if something goes wrong are part of the transaction, the transaction is generally treated as a financial service and is therefore GST-exempt. In contrast, services that only transmit information between parties, without actually moving money or taking on settlement responsibility, do not qualify as financial services and are typically subject to GST.

Notably, in cases where PSPs do not provide settlement, some additional or incidental services, such as facilitating communication between parties or providing payment gateways and processing technology, may also fall within the financial services category if they are closely connected. Conversely, functions such as administrative support, compliance, reporting, or marketing are generally not considered incidental, although they could still be treated as part of a financial service if they are bundled into a single overall supply.

Another critical issue is determining whether the provider is making one combined supply or several separate supplies. This depends on the facts of the transaction and the contractual arrangements. In cases where there is a single supply, the GST treatment follows the dominant element.

Generally, settlement is included in the supply, making it the dominant element of the transaction, and resulting in the entire bundled service being treated as a financial service. Nonetheless, if certain elements of the transaction, for example, advertising or promotion services, are sufficiently separate, they may be treated as independent supplies and taxed differently.

Conclusion

The Inland Revenue guidance highlights that when determining GST treatment of transactions relating to financial services, the treatment depends less on labels and more on the substance of the arrangement. More specifically, taxable persons engaged in these types of services should focus on whether settlement is involved and how closely other services are tied to it, to properly determine whether their supplies are subject to GST or exempt.

Source: Inland Revenue

How does GST apply to payment service providers in New Zealand?

GST treatment depends on whether the provider delivers settlement services. If the provider authorises and executes payments, transfers funds, and assumes risk, the service is generally treated as a GST-exempt financial service. If the provider only transmits information without handling funds, GST typically applies.

What is the key factor in determining GST treatment for payment services?

The most important factor is whether settlement services are provided. Settlement involves transferring funds and taking responsibility for the transaction. This determines whether the service qualifies as a financial service and is exempt from GST.

Are all payment-related services considered financial services for GST purposes?

No, not all services qualify. Services that only involve communication, technology, or infrastructure without handling the actual transfer of funds are generally not considered financial services and are subject to GST unless closely tied to a settlement service.

Can bundled payment services affect GST treatment?

Yes, when services are bundled into a single supply, the GST treatment follows the dominant element. If settlement is the main component, the entire bundle is usually treated as a GST-exempt financial service.

Are administrative or marketing services treated as financial services?

Typically, administrative, compliance, reporting, or marketing services are not considered financial services on their own. However, if they are bundled into a broader financial service where settlement is dominant, they may be treated as part of that exempt supply.

What should businesses focus on to determine correct GST treatment?

Businesses should focus on the substance of their arrangements rather than labels. Specifically, they need to assess whether settlement is involved and how closely related any additional services are to that core function.

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