New Tax Credit Schemes for Businesses
The Government has released three issues papers detailing options for proposed new tax concessions. It is planned to have the schemes in place by 1 April 2008.
The issues papers propose tax credits to encourage export market development, research and development (R&D) and skills training. However, there are tight criteria in order for businesses to be eligible for the credits. Tax credits were noted in the review as playing a significant role in greater innovation, investment and improved productivity. Tax credits would take the form of a credit against tax payable by the business of up to 15c for every $1 spent. The proposed new programs are:
Market development tax credits - exporters would be able to claim tax credits on up to $1 million spent on marketing goods anywhere overseas except Australia. These credits would only be available to firms with an annual turnover of less than $50 million who spend at least $20,000 a year on marketing products which are substantially of New Zealand origin. The market development tax credit would be limited to expenditure on: in-market visits; overseas representation; bringing overseas buyers to New Zealand; advertising and promotion (excluding sponsorships); marketing material; trade shows and events; and market research.
R&D tax credits - a tax credit will be available for any activity which is of a systematic, investigative, and experimental nature and is pursued with the purpose of acquiring new knowledge, resolving scientific or technological uncertainty, creating new or improved products/ services/ devices/ or materials, or which has an appreciable element of novelty. The credits will be available to all business structures, however they must be ‘in business’ and must spend more than $20,000 on eligible R&D expenditure in each year a claim is made. An exception to the threshold has been proposed however for payments made to approved research providers to allow small firms to have access to the concession and benefit from R&D programs without having to invest in R&D equipment and expertise themselves.
Skills training tax credits - proposes tax credits be available to all employers who invest in training staff. The tax credit should focus on training that leads towards nationally recognised qualifications that demonstrate transferable skills. Eligible training would be linked to qualifications at or below level 4 on the National Qualifications Framework (NQF) and may also be extended to cover qualifications that are not on the NQF, but which meet some defined criteria and are recognised international or industry standards. The credit will be available for costs such as tuition and course fees, the cost of training materials, instructors, or rent paid for training facilities.
Access to issues papers is available through the IRD Policy Advice Division website: http://www.taxpolicy.ird.govt.nz/publications/index.php?catid=2
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Important: This is not advice. Readers should not act solely on the basis of the material contained in this report. Items herein are general comments only and do not constitute or convey advice perse. Changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas.
