GST overseas aid anomaly removed

From July, grants or parts of grants made by the New Zealand Agency for International Development and transferred to overseas development programmes will be exempted from GST, Revenue Minister Michael Cullen announced today.

“The change corrects an anomaly in the law whereby no GST is payable on a government grant that is paid directly to an overseas agency, but a grant made to a New Zealand agency that transfers the money to an overseas agency attracts GST,” Dr Cullen said.

“The problem was recently highlighted by the Working Party on Charities in its second report to the government.

“The change means that New Zealand recipients of NZAID grants intended for overseas use will have to return GST only on the portion of the grant that is allocated for administration and capacity building in New Zealand, typically between 1 and 4 percent.

“This will free an extra $1.2 million available for overseas development assistance, since the funding that would have been returned to the government can now be devoted to other projects,” Dr Cullen said.

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