Trophies and animal products derived from the tourist, hunting and safari industry that are to be mounted in New Zealand - zero-rating (WITHDRAWN)

All legislative references are to the Goods and Services Tax Act 1985.

Question

We have been asked whether extensions exceeding 183 days may be granted under section 11(5)(b) with respect to trophies and animal products derived from the tourist, hunting and safari industry that are to be mounted in New Zealand.

Answer

The 183-day extension period limit provided for in the 1997 TIB Item no longer applies with respect to trophies and animal products derived from the tourist, hunting and safari industry that are to be mounted in New Zealand. Consequently, extensions exceeding 183 days may be granted with respect to such trophies and animal products if section 11(5)(b) is satisfied in the particular case.

Industry practice indicates that generally a 12-month extension period, beginning on the day of the time of the supply, will be appropriate. However, when the information provided indicates that a 12-month extension period is not appropriate in the particular case, a shorter or longer extension period may be granted.

Analysis

Background

1. Taxidermists have stated that they are increasingly unable to mount trophies and animal products derived from the tourist, hunting and safari industry within sufficient time for the supplies of goods and services involved to qualify to be zero-rated. Taxidermists attribute this to an increased demand for mounting services resulting from growth in the tourist, hunting and safari industry, the small size of the New Zealand taxidermy industry, and the specialised and time-consuming nature of mounting.
2. Under section 11(5)(b), the Commissioner may extend the 28-day period within which a supply of goods must be exported from New Zealand in order to qualify to be zero-rated. An extension may be granted where, due to the nature of the supply, it is not practicable for the supplier to export the goods, or a class of the goods, within 28 days beginning on the day of the time of supply.
3. The Commissioner's practice has been to issue statements, published in the Tax Information Bulletin, governing the exercise of the discretion under section 11(5)(b) with respect to industries that require extensions to the 28-day statutory period. The Commissioner has issued statements in respect of two industries: the bloodstock industry and the tourist, hunting and safari industry. These statements recognise that the 28-day statutory period is not practicable for these industries. The statements apply on an industry-wide basis to specified supplies and set out the maximum extension period that may be granted in any particular case.
4. In "Trophies and animal products derived from the tourist, hunting and safari industry: zero-rating under GST", Tax Information Bulletin vol 9, no 6 (June 1997) (the 1997 TIB Item), the Commissioner's practice on the exercise of the discretion under section 11(5)(b) with respect to trophies and animal products derived from the tourist, hunting and safari industry is set out. The 1997 TIB Item states that applications for extensions, not exceeding 183 days, may be made with respect to certain supplies associated with trophies and animal products derived from the tourist, hunting and safari industry. The implication of this is that extensions exceeding 183 days may not be granted.
5. The supplies covered by the 1997 TIB Item are specified to be the taxidermy service provided by the taxidermist, the packaging and shipping of the trophy and related animal products, and the trophy fee. The 1997 TIB Item states that the last two supplies are zero-rated provided their supply is in accordance with the relevant provisions of the Act. It also states that the taxidermy service provided by the taxidermist is chargeable with GST at the standard rate.
6. The 1997 TIB Item was amended by "Trophies and animal products derived from the tourist, hunting and safari industry: zero-rating under GST" Tax Information Bulletin vol 15, no 7 (July 2003) (the 2003 TIB Item). The 2003 TIB Item concludes that, as a result of legislative changes, the 1997 TIB Item is no longer correct in stating that taxidermy services cannot be zero-rated. The 2003 TIB Item states that taxidermy services qualify to be zero-rated if section 11A (1)(m) is satisfied. It also emphasises that the 1997 TIB Item is limited to the factual scenario described in it and that other factual scenarios may have different tax consequences.

Legislation

7. Section 11(1)(d) and (e) provides:
   
   

   11. Zero-rating of goods-

   (1) A supply of goods that is chargeable with tax under section 8 must be charged at the rate of 0% in the following situations:

   ...

   (d) subject to subsection (4), the supplier will enter the goods for export under the Customs and Excise Act 1996 in the course of, or as a condition of, making the supply, and will export the goods; or

   (e) subject to subsection (4), the goods will be deemed to be entered for export under the Customs and Excise Act 1996 and will be exported by the supplier in the course of, or as a condition of, making the supply; ...

8. Section 11(4) and (5) provides:
   
   

   (4) If subsection (1)(d) or (1)(e) applies and the goods are not exported by the supplier within 28 days beginning on the day of the time of supply or a longer period that the Commissioner has allowed under subsection (5), the supply of the goods must be charged with tax at the rate specified in section 8 despite subsection (1)(d) and (1)(e) but subject to subsection (1)(a), (1)(b) and subsection (5).

   (5) The Commissioner may extend the 28-day period before a supply of goods is charged with tax at the rate specified in section 8 if the Commissioner has determined, after the supplier has applied in writing, that-

   (a) circumstances beyond the control of the supplier and the recipient have prevented, or will prevent, the export of the goods within 28 days beginning on the day of the time of supply; or

   (b) due to the nature of the supply, it is not practicable for the supplier to export the goods, or a class of the goods, within 28 days beginning on the day of the time of supply.

Extension to time period

9. The Commissioner is satisfied that, due to the nature of the supply, the 183-day extension period limit provided for in the 1997 TIB Item is insufficient with respect to trophies and animal products derived from the tourist, hunting and safari industry that are to be mounted in New Zealand.
10. Having considered the industry practice, including the mounting process, the Commissioner considers that generally a 12-month extension period will be appropriate for trophies and animal products derived from the tourist, hunting and safari industry that are to be mounted in New Zealand. When the information provided indicates that a 12-month extension period is not appropriate in the particular case, a shorter or longer extension period may be granted.
11. "Mounted" and "mounting" denote the taxidermy service whereby animal parts are removed, preserved, treated and attached to a form or mannequin for permanent display.
12. The Commissioner therefore considers that the 183-day maximum extension period provided for in the 1997 TIB Item no longer applies with respect to trophies and animal products derived from the tourist, hunting and safari industry that are to be mounted in New Zealand. The 1997 TIB Item continues to apply with respect to trophies and animal products derived from the tourist, hunting and safari industry that are not to be mounted in New Zealand.
13. Applications for extensions of the 28-day statutory period with respect to trophies and animal products derived from the tourist, hunting and safari industry that are to be mounted in New Zealand must be made in writing and sent with the necessary documentation to the supplier's local Inland Revenue office. An extension may be granted with respect to a good or class of goods.
14. This item applies with respect to the supplies of goods and services specified in the 1997 TIB Item. In some cases, these goods and services are supplied to the tourist-hunter as part of a package, which may include the provision of other types of supplies such as accommodation, food, sightseeing and other activities. Zero-rating does not apply to these other types of supplies that are enjoyed and/or consumed in New Zealand.

[This item was issued by the Office of the Chief Tax Counsel on 28 June 2007. It was previously released for public consultation as exposure draft QB0054].