Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Tax credits paid in cash - Tax credits for R&D tax losses

MX 1: When subpart applies

You could also call this:

“This explains when companies can use special tax rules for research and development expenses”

This part of the law applies to you for a tax year if you choose it to apply and meet certain conditions. You need to be a company that meets specific criteria. You must have a net loss for the tax year when not considering this part of the law. If you’re part of a group of companies, your whole group must also have a net loss. You need to spend money on research and development during the year. You must meet certain rules about how much you spend on wages. The intellectual property or knowledge that comes from your research must belong to you, either by yourself or with others.

There’s also a definition of an ‘R&D group’. This is a group of companies, look-through companies, or limited partnerships. All the companies in the group must be part of the same company group. If the look-through companies and limited partnerships were treated as companies, they would also be part of this company group. For limited partnerships, each partner is treated as if they owned a share of the company equal to the share of money they put into the partnership.

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 It might be out of date or be missing some parts.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=DLM6767134.

Topics:

Money and consumer rights > Taxes

Business > Industry rules

ML 3: Payment by Commissioner, or

“Commissioner no longer pays tax credits in cash”

MX 2: Corporate eligibility criteria, or

“Rules for companies to qualify for cash tax credits”

Part M Tax credits paid in cash
Tax credits for R&D tax losses

MX 1When subpart applies

This subpart applies to a person for an income year when—
the person chooses that the subpart apply to the person for the income year; and
the corporate eligibility criteria in section MX 2 are met; and
ignoring this subpart, the person has a net loss for the corresponding tax year; and
if the person is a member of a group of entities meeting the requirements of subsection (2), the R&D group, in aggregate and ignoring this subpart, has a net loss for the corresponding tax year; and
the person incurs R&D expenditure in the income year; and
the wage intensity criteria in section MX 3 are met; and
intellectual property and know-how that results from the research or development vests in the person, solely or jointly.

R&D group means a group of entities for which—
each member of the group is a company, look-through company, or limited partnership; and
all the members of the group that are companies are members of the same group of companies (the company group); and
each member of the group that is a look-through company would be a member of the company group if the look-through company were treated as being a company; and
each member of the group that is a limited partnership would be a member of the company group if the partnership were treated as being a company and each partner were treated as holding a proportion of the total shares in the company equal to the proportion of the total capital contributions, as defined in section HG 11 (Limitation on deductions by partners in limited partnerships), to the partnership that is capital contributions made by the partner to the partnership.

Notes

Section MX 1: inserted (with effect on 1 April 2015 and applying for income years beginning on or after that date), on 24 February 2016, by section 213(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section MX 1(1) heading: inserted, on 29 March 2018 (with effect on 1 April 2015), by section 165 of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).