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DB 45: Bribes
or “Bribes cannot be claimed as tax deductions”
You could also call this:

“Tax deductions for pollution and noise reduction costs in business”

When you run a business in New Zealand, you can get money back for some costs related to stopping pollution or noise. This applies if:

You spend money on things listed in schedule 19, parts A or B, but not part C.

The money isn’t spent on property you plan to sell, except for land used as a landfill.

No other rule lets you get money back for this spending.

How much money you can get back depends on your situation:

If your business is still running, you use a special formula.

If your business has ended, you get back the reduced value of what you spent.

If you improved some land to stop pollution, but that improvement was destroyed or can’t be used anymore, you get back the reduced value of what you spent.

The amount you get back is worked out using different rates. These rates depend on what kind of spending it was and how long it’s expected to last.

You can choose between two ways to calculate your money back: the ‘straight-line’ way or the ‘diminishing value’ way.

This rule overrides the usual rule about not getting money back for big, long-term expenses. But you still need to follow the general rules about when you can get money back.

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Next up: DB 47: Payments for remitted amounts

or “Tax deductions for payments on previously forgiven debts”
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Part D Deductions
Specific rules for expenditure types

DB 46Avoiding, remedying, or mitigating effects of discharge of contaminant or making of noise

  1. This section applies when a person—

  2. carries on a business in New Zealand; and
    1. the person incurs, in the business or in ending the operations of the business, expenditure that is—
      1. of a kind listed in schedule 19, in either part A or B (Expenditure in avoiding, remedying, or mitigating detrimental effects of discharge of contaminant or making of noise) and not in schedule 19, part C; and
        1. not incurred in relation to revenue account property other than land that is subject to section CB 8 (Disposal: land used for landfill, if notice of election); and
        2. no other provision allows a deduction for the expenditure.

          1. The person is allowed for an income year a deduction for the expenditure of,—

          2. if paragraphs (b) and (c) do not apply, an amount that is calculated using the formula—
            1. if the operations of the business for which the expenditure was incurred come to an end in the income year, the diminished value or adjusted value of the expenditure for the income year:
              1. if an improvement to land described in schedule 19, part A, on which the expenditure was incurred is destroyed or is rendered useless for the purposes for which the expenditure was incurred, and paragraph (b) does not apply, the diminished value or adjusted value of the expenditure for the income year.

                1. The items in the formula in subsection (2)(a) are defined in subsections (4) and (6).

                2. Rate is—

                3. 100% if the expenditure is of a kind listed in schedule 19, part A, item 1, or part B and neither paragraph (b) nor (c) applies:
                  1. the appropriate rate under subsection (5) if—
                    1. the expenditure is of a kind listed in schedule 19, part A, items 2 to 5; and
                      1. paragraph (c) does not apply:
                      2. the rate for the kind of expenditure, the income year, the valuation method adopted under subsection (6), and the person determined by the Commissioner under section 91AAN of the Tax Administration Act 1994 if such a rate is determined.

                        1. The rate for expenditure if the requirements of subsection (4)(b) are met is—

                        2. the rate set out in schedule 12, column 2 (Old banded rates of depreciation) that is nearest to the rate calculated for the expenditure using the formula in subsection (7) if the person chooses to use the straight-line equivalent method:
                          1. the rate set out in schedule 12, column 1 that corresponds to the rate under paragraph (a) if the person chooses to use the diminishing value equivalent method.

                            1. Value is—

                            2. the amount of the expenditure incurred if the person chooses to use the straight-line equivalent method:
                              1. the diminished value of the expenditure for the income year if the person chooses to use the diminishing value equivalent method.

                                1. The formula for the rate referred to in subsection (5)(a) for a kind of expenditure to which subsection (4)(b) applies is—

                                  100% ÷ assumed life.

                                  Where:

                                  • In the formula in subsection (7), assumed life for expenditure and an income year is,—

                                  • for expenditure associated with a business activity that does not require a resource consent, 35:
                                    1. for expenditure associated with a business activity that requires a resource consent, the lesser of 35 and the number of years in the period of the resource consent that include or follow the time at which the expenditure is incurred.

                                      1. In this section, adjusted value means, where the person chooses to use the straight-line equivalent method, the amount calculated using the formula—

                                        amount of expenditure − deductions allowed + income derived.

                                        Where:

                                        • In the formula in subsection (9),—

                                        • amount of expenditure is the total amount of the expenditure incurred:
                                          1. deductions allowed is the total amount of the expenditure allowed as a deduction in previous income years:
                                            1. income derived is the total amount of income derived under section CB 28(8) (Environmental restoration accounts) in relation to the expenditure.

                                              1. In this section, diminishing value equivalent method means the method of calculating an amount of deduction under this section by subtracting, in each income year, a constant percentage of the diminished value of the expenditure from the diminished value of the expenditure.

                                              2. In this section, straight-line equivalent method means the method of calculating an amount of deduction under this section by subtracting, in each income year, a constant percentage of the amount of the expenditure incurred from the adjusted value of the expenditure.

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

                                              Notes
                                              • Section DB 46: replaced (with effect on 1 April 2008), on , by section 38(1) (and see section 38(2) for application) of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).