Verified for 2026 Tax Year

Financial Services & B2B Zero-Rating

The "B2B Zero-Rating" election. Learn exactly how banks and lenders can legally claim GST on their massive overhead expenses by opting in.

Supplying financial services—such as lending money, issuing mortgages, or providing life insurance—is generally exempt from GST in New Zealand. While this keeps loans cheaper for consumers, it creates a massive tax problem for the financial institutions themselves.

The 15% Cost Problem

A bank buys thousands of computers, pays massive commercial rent, and hires cleaning companies. All of these expenses include 15% GST. Because the bank makes exempt supplies, it is legally barred from claiming that GST back as an input tax credit. This effectively increases their operational costs by 15% across the board.

The Solution: B2B Zero-Rating

To prevent these costs being passed onto businesses, the law allows financial providers to "elect" to treat B2B lending as Zero-Rated instead of Exempt.

Bank makes a formal election with IRD

Lending to Consumers

Remains EXEMPT

Cannot claim input GST

Lending to Businesses

Becomes ZERO-RATED (0%)

CAN claim input GST

How the Election Works

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Election: You must formally elect into this regime by notifying the Inland Revenue. You cannot just start doing it.
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Result: If you lend money to another GST-registered business (B2B) whose taxable supplies make up at least 75% of their total supplies, the loan is treated as a Zero-Rated taxable supply.
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Benefit: Because lending to that business is now legally a "Taxable Supply" (even though the rate is 0%), the bank is allowed to claim back the GST on the overhead expenses related to making that supply.

Apportionment is Required

You cannot just claim 100% of your overhead GST after electing. If you lend to both businesses (B2B) and consumers (B2C), you must determine the exact percentage of your lending that is B2B (e.g., 60%). You can then only claim 60% of your general overhead GST. Use our Apportionment Calculator below to assist with this.

Share Trading

Buying and selling shares is defined as an exempt financial service. You don't charge GST on the sale price, and you cannot claim GST on the brokerage fees.

However, if you are a "professional day trader" dealing in shares full-time, you still cannot register for GST because your entire activity involves making exempt supplies. You do not meet the definition of a "taxable activity".

Frequently Asked Questions

Why can't banks normally claim GST?

Supplying financial services (like lending money or issuing mortgages) is generally exempt from GST. Because they make exempt supplies, banks and lenders normally cannot claim GST on their overheads.

What is the B2B Zero-Rating election?

It's an election that allows financial service providers to treat their lending to other GST-registered businesses (B2B) as Zero-Rated (0%) instead of Exempt. This change allows them to claim back GST on their related expenses.

Do I charge GST on share trading?

No. Buying and selling shares is an exempt financial service. You don't charge GST on the sale price, and you generally can't claim GST on the brokerage.

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