29 March 2004 Media Statement

Tax change aids venture capital investment

A tax bill aligning New Zealand’s venture capital tax rules more closely with those of Australia was introduced to Parliament today.

Revenue Minister Michael Cullen said the change should help New Zealand compete more effectively with Australia for venture capital.

“The amendments target foreign investors who are tax-exempt in their own countries and therefore cannot claim or make use of credits for any tax they pay in New Zealand.

“They will be exempted from New Zealand income tax on the sale of shares in certain unlisted New Zealand companies. The change will apply to foreign investors who are resident in most of the countries with which New Zealand has a double tax agreement and who are tax-exempt at home.

“The exemption will also apply to foreign funds from countries representing our main investment partners that invest on behalf of foreign venture capital investors who are generally tax-exempt in their own countries.

“Other important changes in the bill include amendments to the legislative framework governing the resolution of disputes between taxpayers and Inland Revenue, to improve the process for both parties.

“The bill also introduces a 6.7 per cent rebate, or ‘discount,’ to encourage people who begin receiving self-employed or partnership income to make voluntary payments of income tax in their first year of business, rather than wait to pay tax on year-one income in year two. The change is designed to reduce the financial strain that individuals in business face in their first three years of business,” Dr Cullen said.

Information on these and other matters in the bill can be found in the commentary on the Taxation (Annual Rates, Venture Capital and Miscellaneous Provisions) Bill, available at www.taxpolicy.ird.govt.nz.

ENDS

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