IRD Details New R&D Cash-Out Rules

April 6, 2016 New Zealand Taxation

tax credits for researchSmall research firms in New Zealand will soon receive cash payments from the government when incurring losses.

On April 5th the Inland Revenue Department released a report detailing early information regarding the upcoming rules for “cashing out” losses incurred during research and development activities.

In the report it is stated that when the rules are fully enacted, New Zealand resident entities with significant research and development expenses will be able to receive a cash payment equivalent to their tax losses for the year.

The cash payment will be repaid with the tax payments made by the entity over subsequent years.

The amount of the payment is set to be capped at NZD 500 thousand in 2016, rising by NZD 300 thousand each year for the next five years.

It was stated that the cash payment does not offer any economic advantage to the receiver, as the business would have been able to use its losses to minimize taxes in following years.

The intended purpose of the “cash out” system is to ease the financial flows of research-intensive businesses in their initial years of operation, prior to being able to market a product and draw profits.

Photo by Sanofi Pasteurresea