What is CZR?
From 1 April 2011 it became compulsory for certain land transactions to be compulsory zero rated (CZR). This means that GST will be charged at the zero percent. The regime will apply to almost all transactions involving land that are made between GST registered parties. There are some limited exclusions.
They are or expect to be a registered person;
That they are acquiring the land with the intention of using it for making taxable supplies at settlement;
That they do not intend to use the land as a principal place of residence.
The vendor is entitled to rely on the information provided by the purchaser in determining the tax treatment of the supply.
Nominees will be caught by these new rules. A sale transaction will be treated as a single supply from the vendor to the nominee.
Especially given the prospect of nominees there may be changes in the GST position between the time of signing, the time of supply and the settlement date.
From the vendor’s perspective the best practice will be to make all prices “plus GST” so that, if it transpires that GST is in fact payable to the Inland Revenue Department, the vendor is able to recover the GST from the purchaser. An example would be where a purchaser intending to GST register where it was thought CZR would apply, does not do so before settlement. If the transaction is priced “plus GST” the vendor can collect the GST from the purchaser on settlement. If it is priced “inclusive of GST” the vendor cannot, yet might need to account to the IRD for the GST.