Practical Law New Zealand has released a practice note dubbed “Digital business in New Zealand”, providing a high-level overview of how to establish and run an online business in New Zealand.
Whether you are an entrepreneur looking to launch your online business or you run a digital business already, this practice note is a must read as it’s essential that you are on top of the legislative requirements, including security of online transactions and personal data, advertising and liability for online content.
In addition to the Practical Law New Zealand resource you can download on this page, Hayley Miller, a Partner at Kensington Swan has shared her best practice tips on doing business in New Zealand in an online capacity.
Kensington Swan is one of New Zealand’s leading commercial law firms and the firm’s services include technology and innovation. Subject to meeting regulatory requirements, in February 2020 Kensington Swan will combine with the world’s largest law firm, Dentons, enabling the firm to connect with the experience and talents of over 10,000 lawyers globally.
Hayley and her colleagues Campbell Featherstone and Gretchen Fraser, Senior Associates, are the authors of Practical Law New Zealand’s practice note, “Digital business in New Zealand”.
Compliance tips for online businesses
Abigail Milburn, who is heading up the launch of the Practical Law New Zealand resource centre, asked Hayley to share three tips for those setting up or running an online business in New Zealand. They are:
1. Stay up to speed with New Zealand’s privacy laws
If you or your client will be collecting “personal information” (information about an identifiable individual) as part of running an online business in New Zealand, then you will need to make sure you know about and comply with New Zealand’s privacy laws and best practice.
This is an area to keep a close eye on because a new Privacy Act is currently expected to come into force in early 2020 which will introduce, for example, mandatory reporting of privacy breaches and new obligations on the transfer of personal information from New Zealand to other countries. The new Privacy Act will also apply extra-territorially, so New Zealand privacy laws will likely apply to the offer of goods and services to New Zealanders even where the offer takes place online from outside New Zealand.
In connection with the above, businesses need to ensure they comply with the Unsolicited Electronic Messages Act 2007 – New Zealand’s “anti-spam” law – when signing consumers up to their marketing databases.
2. Check your offer complies with New Zealand’s consumer protection laws
New Zealand’s consumer protection laws, such as the Consumer Guarantees Act 1993 and the Fair Trading Act 1986, generally apply to the offer of goods and services in New Zealand – including where the offer is made online.
The Consumer Guarantees Act 1993 sets out minimum guarantees for goods and services and establishes remedies for consumers against suppliers (and in some cases manufacturers) if those guarantees are not met.
The Fair Trading Act 1986 contains protections for consumers in relation to the conduct of those in trade. The Fair Trading Act 1986 expressly prohibits conduct that is misleading or deceptive and regulates such matters as the offer of extended warranties and unfair practices, such as bait advertising. In addition, the Fair Trading Act 1986 establishes a regime where unfair terms in standard form contracts may be struck down – including any terms that purport to exclude (whether directly or in practical terms) a consumer’s ability to enforce its rights under New Zealand consumer law.
It is not possible to contract out of the application of either the Consumer Guarantees Act 1993 or the Fair Trading Act 1986 other than in certain limited cases applicable only to business-to-business contracts.
The New Zealand Commerce Commission has indicated that online retail is a “priority focus area” for 2019/2020, so businesses conducting online sales should be extra vigilant that they are complying with all New Zealand consumer protection laws.
3. Tax on online sales is set to change
Online sales in New Zealand are currently taxed in the same way as offline sales. Sales of goods and services made within New Zealand are subject to goods and services tax (GST) at the rate of 15%. There are very few exemptions available. GST must be collected by the supplier for sales made by New Zealand-resident suppliers within New Zealand. Where sales are made online into New Zealand by non-New Zealand resident suppliers they will be subject to GST, but only when the goods are imported into New Zealand and the importer (usually the buyer) pays the GST – as well as, in most cases, a customs processing fee.
This is another area to watch – from 1 October 2019 new rules have come into play that require non-New Zealand resident suppliers of goods worth less than $1,000 selling goods online into New Zealand to collect and return GST on those goods (the so called “Amazon tax”). A non-resident supplier would be required to collect GST in all cases, and to register in New Zealand for GST purposes, if the supplier’s total sales to New Zealand consumers exceed $60,000 per annum. Where GST is collected by a non-resident supplier, the goods will be cleared into New Zealand without the need for the importer (in other words, the buyer) to pay a customs processing fee.
For more details on these issues and more, simply fill out the form on this page to download Practical Law New Zealand’s practice note on “Digital business in New Zealand”.