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New Zealand law explained for everyone

Income Tax Act 2007

Deductions - Specific rules for expenditure types

DB 38: Patent rights: devising patented inventions

You could also call this:

“Getting money back for inventing and selling patents”

If you invent something and get a patent for it, you can get some money back from the government. This is called a deduction. You can get this deduction even if you invented it with someone else.

If you use your patent to make money in a year, you can get a deduction for money you spent before 1 April 1993 to invent it. But you can’t get this deduction if you’ve already got money back for it in another way.

If you sell all the rights to your patent, you can get a deduction for all the money you spent on inventing it. This includes money you spent at any time, as long as you haven’t already got a deduction for it.

If you only sell some of the rights to your patent, you can still get some money back. The amount you get back depends on how much you sold the rights for compared to how much all the rights are worth.

These rules are special and can give you money back even when other rules might not let you. But you still need to follow the general rules about deductions.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1513674.

Topics:
Money and consumer rights > Taxes
Business > Intellectual property
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DB 37: Expenses in application for patent or design registration, or

“You can claim tax deductions for unsuccessful patent or design registration applications”

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DB 39: Patent rights acquired before 1 April 1993, or

“Tax deduction for selling patent rights obtained before April 1993”

Part D Deductions
Specific rules for expenditure types

DB 38Patent rights: devising patented inventions

  1. This section applies when a person incurs expenditure in devising an invention for which a patent has been granted. The section applies whether the person devised the invention alone or in conjunction with another person.

  2. When the person uses the patent in deriving income in an income year, they are allowed a deduction for expenditure incurred before 1 April 1993, but not if a deduction has been allowed for the expenditure under any other provision of this Act or an earlier Act.

  3. If the person disposes of all the patent rights relating to the invention, they are allowed a deduction for the expenditure that they have incurred, whenever it is incurred, in connection with devising the invention to the extent to which a deduction has not already been allowed under subsection (2).

  4. If the person disposes of some of the patent rights relating to the invention, they are allowed a deduction for part of the expenditure described in subsection (3). The part is calculated by dividing the amount derived from the disposal by the market value of the whole of the patent rights on the date of the disposal.

  5. This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.

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Notes
  • Section DB 38(3): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on , by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
  • Section DB 38(4): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on , by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).