Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Deductions - Specific rules for expenditure types

DB 1: Taxes, other than GST, and penalties

You could also call this:

“Certain taxes and penalties cannot be claimed as deductions”

You cannot claim a deduction for income tax. This includes taxes from other countries that are similar to income tax or based on certain global anti-base erosion rules. You also can’t claim deductions for taxes that are like the ones New Zealand will have when new laws come into effect.

You can’t claim deductions for money withheld under specific US tax laws, or for most ancillary taxes. Civil penalties under the Tax Administration Act 1994 are not deductible. You also can’t claim deductions for taxes, penalties, or interest on unpaid tax from other countries if they’re similar to New Zealand’s civil or criminal penalties or interest charges.

However, you can still claim deductions for PAYE, FBT, ESCT, RWT, and NRWT. These are exceptions to the general rule.

This rule overrides the general permission for deductions.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1513572.

Topics:
Money and consumer rights > Taxes
Previous

DA 5: Treatment of expenditure for commercial fit-out, or

“Rules for commercial fit-out expenses removed from tax calculations”

Next

DB 2: Goods and services tax, or

“Rules for GST deductions and how they affect your taxes”

Part D Deductions
Specific rules for expenditure types

DB 1Taxes, other than GST, and penalties

  1. A person is denied a deduction for the following:

  2. income tax:
    1. a tax imposed in a country or territory outside New Zealand that is 1 or more of the following:
      1. substantially the same as income tax:
        1. based on Articles 2.1 to 2.3 of the global anti-base erosion model rules:
          1. based on Articles 2.4 to 2.6 of those model rules:
            1. a qualified domestic minimum top-up tax, as defined in Article 10.1.1 of those model rules:
              1. substantially the same as the tax that will be imposed by this Act—
                1. when all the provisions of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (the amendment Act) listed in section 2(31) and (33) of the amendment Act have come into force; and
                  1. because of the application of the modifications to Article 2.1 of the global anti-base erosion model rules made by section 123(3) of the amendment Act:
                2. an amount withheld under section 1471 or 1472 of the Internal Revenue Code of 1986 (USA), as amended from time to time:
                  1. ancillary tax, unless listed in subsection (2):
                    1. a civil penalty under Part 9 of the Tax Administration Act 1994:
                      1. a tax, a penalty, or interest on unpaid tax that is—
                        1. payable under the laws of a country or territory outside New Zealand; and
                          1. substantially the same as a civil penalty as defined in section 3(1) of the Tax Administration Act 1994, or a criminal penalty under Part 9 of the Act, or interest imposed under Part 7 of the Act.

                          2. Subsection (1) does not apply to—

                          3. pay-as-you-earn (PAYE):
                            1. fringe benefit tax (FBT):
                              1. employer’s superannuation contribution tax (ESCT):
                                1. resident withholding tax (RWT):
                                  1. non-resident withholding tax (NRWT).

                                    1. This section overrides the general permission.

                                    Compare
                                    Notes
                                    • Section DB 1(1)(b): replaced (with effect on 1 January 2024), on , by section 35(1) of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).
                                    • Section DB 1(1)(bb): inserted, on , by section 41 of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
                                    • Section DB 1 list of defined terms global anti-base erosion model rules: inserted (with effect on 1 January 2024), on , by section 35(3) of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).