Goods and Services Tax Act 1985

Imposition of tax

11C: Treatment of supplies by operators of loyalty programmes

You could also call this:

"Tax rules for loyalty programmes that give rewards to customers"

Illustration for Goods and Services Tax Act 1985

When you run a loyalty programme, you make a deal with someone to give them loyalty points. You get something in return for giving them these points. This is called a loyalty transaction.

You can delay when you have to pay tax on this deal if you meet some rules. You can find these rules in section 9(9). One rule is that at least 25% of the things you sell must not have tax on them.

Another rule is that you must sell other things besides loyalty points. The loyalty points you give out must only be able to be used with the other things you sell. When someone uses their loyalty points, you must be able to tell if tax was paid on them and if you delayed paying tax on them, as described in section 8 and section 9(9).

If you have a partner in your loyalty programme, you can still follow these rules even if your partner also gives out loyalty points.

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This page was last updated on 18 July 2025

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM2457234.

Topics:

Money and consumer rights > TaxesMoney and consumer rights > Consumer protection

11B: Zero-rating of some supplies by territorial authorities or water organisations, some supplies involving contributions to local authorities or water organisations, or

"Some council services are tax-free if they're paid for in a special way or if land is exchanged."

12: Imposition of goods and services tax on imports, or

"Paying tax on goods you bring into New Zealand"

Part 2Imposition of tax

11CTreatment of supplies by operators of loyalty programmes

This section applies when an operator of a loyalty programme makes a supply of services by entering into an arrangement (a loyalty transaction) with another person (the purchaser) through which the operator receives consideration for providing loyalty points to a third person as directed by the purchaser.
The operator may defer the time of the supply of the services under section 9(9) to the time at which loyalty points are redeemed for reward if they meet the requirements of subsections (3) to (5).
The first requirement is that 25% or more of the operator's taxable supplies must be zero-rated supplies of goods or services. The 25% threshold—
may be met by including the taxable activity of an associated person:
must be met for the 12-month period that ends with the month in which the supply of services under the loyalty transaction is made, and the operator must have reasonable grounds for believing the threshold will be met for the 12-month period that begins with the month in which that supply of services is made.

The second requirement is that—
the operator or an associated person must make supplies of goods or services in a business activity (the main business activity) that is an activity other than a business of operating a loyalty programme; and
the loyalty points supplied by the operator must only be able to be redeemed for reward as part of the main business activity.

The third requirement is that when the loyalty points are redeemed, the operator must be able to identify whether—
tax under section 8 has been imposed on the supply of the loyalty points:
the time of supply has been deferred under section 9(9).

If the operator has a partner in an associated loyalty programme, the second requirement is still treated as met if, in addition to those requirements, loyalty points supplied by the operator are able to be redeemed for reward by the partner.

Notes

Section 11C: inserted, on 6 October 2009, by section 711 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).