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Income Tax Act 2007

Timing and quantifying rules - Depreciation

EE 34: Annual rate for patent granted in 2005–06 or later income year

You could also call this:

“Yearly rate calculation for patents granted from 2005-06 onwards”

This section talks about how to calculate the annual rate for a patent that you got in the 2005-06 tax year or later. The rate is figured out using a simple formula: 1 divided by the patent’s legal life.

The legal life of the patent can be different depending on your situation. If special rules apply to your patent, the legal life is how long the patent has left from the start of the tax year when you can claim costs for it.

If those special rules don’t apply, there are a few other ways to work out the legal life:

If you weren’t allowed to claim any money back for the patent application, the legal life starts when you get the patent.
If you were allowed to claim money back for the patent application, the legal life starts at the beginning of the tax year when you got the patent application.
If you were allowed to claim money back for the patent application and special rules applied to it, the legal life starts at the beginning of the tax year when you got the patent.

When you’ve worked out the rate using the formula, you need to round it to two decimal places. If the third decimal is 5 or more, round up. If it’s less than 5, round down.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1514616.

Topics:

Money and consumer rights > Taxes

EE 33: Annual rate for fixed life intangible property, or

“Calculating the yearly rate for property with a fixed legal lifespan”

EE 34B: Annual rate for design registrations, or

“How to work out the yearly rate for claiming design registration costs”

Part E Timing and quantifying rules
Depreciation

EE 34Annual rate for patent granted in 2005–06 or later income year

This section applies to an item that is a patent when the patent is acquired by a person in their 2005–06 income year or a later income year.
The rate is the rate calculated using the formula—
$1 ÷ legal life.$

Where:
In the formula, legal life is set out in whichever of subsections (4) to (7) applies to the patent.
If the patent is an item of fixed life intangible property to which section EE 18B or EE 19 applies, legal life is the patent’s remaining legal life from the start of the income year in which the relevant costs are recognised under the section.
If sections EE 18B and EE 19 do not apply to the patent and the person has been denied a deduction for an amount of depreciation loss for the patent application, legal life is the patent’s remaining legal life from the time at which the person acquires the patent.
If sections EE 18B and EE 19 do not apply to the patent, and have not applied to the patent application while the person has owned it, and the person has been allowed a deduction for an amount of depreciation loss for the patent application, legal life is the remaining legal life of the patent application from the start of the income year in which the person acquires the patent application.
If sections EE 18B and EE 19 do not apply to the patent, but have applied to the patent application while the person has owned it, and the person has been allowed a deduction for an amount of depreciation loss for the patent application, legal life is the remaining legal life of the patent application from the start of the income year in which the person acquires the patent.
The rate calculated using the formula is expressed as a decimal and rounded to 2 decimal places, with numbers at the midpoint or greater being rounded up and other numbers being rounded down.

Compare

2004 No 35 s EE 27B

Notes

Section EE 34(4): replaced (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 122(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 34(5): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 122(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 34(6): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 122(3) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 34(7) heading: amended (with effect on 1 April 2015), on 24 February 2016, by section 122(4) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 34(7): amended, on 29 March 2018 (with effect on 1 April 2015), by section 67 of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
Section EE 34(7): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 122(5) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).