WELLINGTON: New Zealand has adjusted the tax rules for start-up companies engaged in research and development activities. The Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016, which came into effect on April 1, 2016, introduces new rules that will allow start-up companies engaging in intensive research and development activities to cash out their tax losses for research and development expenditure.
Under the new legislation, research and development start-up companies will be able to receive a payment for up to 28 percent (the current company tax rate) of their tax losses from research and development expenditure in any given year. To be eligible, the company must be a loss-making company resident in New Zealand, with a sufficient proportion of labor expenditure on research and development.
The amount of losses that can be cashed out will be capped at NZD500,000 (USD339,636) for the 2015–16 year, increasing by NZD300,000 over the next five years, to NZD2m. “A cashed-out loss can be thought of as an interest-free loan from the Government to be repaid from the taxpayer’s future income,” the report said. “It is intended to provide a cash flow timing benefit only.”
