Tax bill introduced
The year's first major taxation bill was introduced into Parliament today. The omnibus bill removes a tax barrier to unlisted New Zealand companies gaining access to foreign venture capital, amends the legislative framework of the disputes resolution process, introduces a 6.7% rebate for payment of tax on self-employment and partnership income in the first year of business, and closes a loophole involving the sale and leaseback of intangibles such as trademarks. These and other changes are detailed in the commentary on the Taxation (Annual Rates, Venture Capital and Miscellaneous Provisions) Bill, the latter courtesy of Legislation Direct. See also the government's media statements.
Hon Dr Michael Cullen
Minister of Revenue
MEDIA STATEMENT
Tax change aids venture capital investment
A tax bill aligning New Zealand’s venture capital tax rules more closely with those of Australia was introduced to Parliament today.
Revenue Minister Michael Cullen said the change should help New Zealand compete more effectively with Australia for venture capital.
"The amendments target foreign investors who are tax-exempt in their own countries and therefore cannot claim or make use of credits for any tax they pay in New Zealand.
"They will be exempted from New Zealand income tax on the sale of shares in certain unlisted New Zealand companies. The change will apply to foreign investors who are resident in most of the countries with which New Zealand has a double tax agreement and who are tax-exempt at home.
"The exemption will also apply to foreign funds from countries representing our main investment partners that invest on behalf of foreign venture capital investors who are generally tax-exempt in their own countries.
"Other important changes in the bill include amendments to the legislative framework governing the resolution of disputes between taxpayers and Inland Revenue, to improve the process for both parties.
"The bill also introduces a 6.7 per cent rebate, or 'discount', to encourage people who begin receiving self-employed or partnership income to make voluntary payments of income tax in their first year of business, rather than wait to pay tax on year-one income in year two. The change is designed to reduce the financial strain that individuals in business face in their first three years of business," Dr Cullen said.
Information on these and other matters in the bill can be found in the commentary on the Taxation (Annual Rates, Venture Capital and Miscellaneous Provisions) Bill, available at http://www.taxpolicy.ird.govt.nz.
Contact: Patricia Herbert [press secretary] 04-471-9412 or 021-270-9013.
Technical inquiries to Helen Mackenzie [tax advisor, Dr Cullen's office] 471-9728.
Hon Dr Michael Cullen
Minister of Revenue
MEDIA STATEMENT
Loophole closed on sale and lease of trademarks
A loophole involving the sale and leaseback of intangibles such as trademarks and newspaper mastheads will be closed through provisions in the taxation bill introduced in Parliament today.
Revenue Minister Michael Cullen announced last year to legislate to prevent a potential and significant revenue loss through use of this mechanism.
"The proposed changes do not affect normal sale and leaseback transactions that are entered into for commercial reasons - only those that could result in participants claiming tax deductions for what are, in substance, repayments of loan principal.
"The finance lease rules in the Income Tax Act are being amended to prevent this happening. The amendments will not apply to transactions entered into before the introduction of the bill.
"The government is aware of only one relevant transaction that was entered into before today. The new rules will not apply to that because the particular circumstances of the taxpayer involved mean that there would be no revenue advantage to the government from doing so," Dr Cullen said.
Further information on the proposed legislation can be found in the commentary on the Taxation (Annual Rates, Venture Capital and Miscellaneous Provisions) Bill, available at www.taxpolicy.ird.govt.nz.
Contact: Patricia Herbert [press secretary] 04-471-9412 or 021-270-9013.
Technical inquiries to Helen Mackenzie [tax advisor, Dr Cullen's office] 471-9728.