New Zealand’s Digital Services Tax: What Lies Ahead for 2025 and Beyond

In 2023, the New Zealand government announced that it had adopted the Digital Services Tax (DST) Act, which introduced a 3% DST on revenue generated from the supply of digital services to New Zealand consumers. The Act targeted large digital services companies, primarily US-based companies, which fall under the scope of the DST rules and regulations.

The enforcement date is still uncertain, although it was initially set for January 1, 2025.

Impact on Digital Service Providers and the Implementation Date

The adopted and published DST Act aims to apply to multinational companies that provide in-scope digital services, including internet search engines, social media, content sharing, or intermediation platform services. In addition to providing these services, the companies must have annual global revenue of at least EUR 750 million per revenue year and at least NZD 3.5 million earned revenue in New Zealand.

The DST is 3% of the revenue generated by the in-scope services within New Zealand. According to the published DST Act, companies that exceed the global and national thresholds must register within 90 days of the end of the first revenue year, and they are subject to the rules.

In addition to registering, companies must file annual DST returns within six months of the end of the DST revenue year.

However, there are some uncertainties about whether the Act will be enacted. The set was January 1, 2025, but the DST Act allows the government to postpone the enactment until January 2, 2030. There are two main reasons why this may occur, although the initial date has passed, and the New Zealand government has not made any announcements.

The first reason is directly related to implementing Pillar One of the OECD’s Two-Pillar multilateral solution and deciding whether the DST Act is necessary. If the agreement on OECD’s Pillar One is achieved, the abolishment of the DST Act should be expected.

The second reason is possible trade retaliation from the US since the biggest US tech companies would undoubtedly exceed the stated threshold.

Conclusion

Whether the New Zealand government will follow Canada's example and implement DST on in-scope services remains to be seen. The debate on whether the effective date will be changed lasted throughout 2024, but no official statements were issued.

It could be concluded that the Act came into force. Still, it should not be surprising if Inland Revenue or other official bodies announce otherwise in the following weeks.

Source: Digital Services Tax Bill, Deloitte, KPMG