Inland Revenue (IR) are seeking to review the taxation treatment of software. NZRise, NZTech and AMS jointly submitted feedback as did Catalyst independently with a further emphasis on the treatment of Open Source software.

Specifically IR are looking to review 3 key “issues”:

  • When does software development expenditure give rise to “trading stock”?
  • What treatment should apply where software development expenditure does not give rise to trading stock?
  • When will the research and development expenditure rules apply?

It is the view of NZRise members that any changes along the lines proposed by IR could materially impact and disadvantage New Zealand owner companies.

For better or worse we consider these changes will only impact the New Zealand owned and operated Software Development industry, with little or no impact on Multi-National companies who sell software in New Zealand. New Zealand owned companies tend to develop software out of cashflow, which differs from Multi-National companies who are often funded via Venture Capital vehicles.

NZRise is concerned this could lead to a potential disadvantage for NZ owned companies and would seek to discuss this specific concern further.

You can read the Inland Revenue proposal here.

The Joint submission to Inland Revenue is located here.

Any questions or comments please contact Victoria MacLennan or Don Christie via [email protected]

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