New Zealand To Ease Tax Rules On Patent Sales

by Mary Swire, Tax-News.com, Hong Kong

04 August 2005

The government of New Zealand is set to introduce new tax rules in an attempt to ease a cash-flow problem for technology firms when they sell patents, Revenue Minister Michael Cullen announced on Tuesday.

As a result of the changes, firms will be allowed to spread the tax liability on patent sales over three years, rather than paying it all in the year of sale. The new rules will be included in the first taxation bill to be introduced next year and, once enacted, are expected to apply from 1 April, 2007.

“The change will remove a tax impediment to investing in new technology and alleviate a problem identified by task forces set up under the government’s Growth and Innovation Framework," noted Dr Cullen.

He continued:

“Technology firms often sell their research, in the form of patents, in return for shares or share options rather than cash. When that happens they may not have the cash to pay tax on the proceeds of the sale.

“Allowing firms to spread the tax over three years will ease their cash-flow problem and help them to forecast their provisional tax accurately, thus avoiding use-of-money interest charges. It will be of particular help to new technology firms."

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