Hon Dr Michael Cullen
Minister of Revenue

2 August 2005 Media Statement

Tax on patent sales to be made easier

The government will introduce a tax change to ease a cash-flow problem for technology firms when they sell patents, Revenue Minister Michael Cullen announced today.

“Firms will be allowed to spread the tax liability on patent sales over three years, rather than paying it all in the year of sale,” Dr Cullen said.

“The change will remove a tax impediment to investing in new technology and alleviate a problem identified by task forces set up under the government’s Growth and Innovation Framework.

“Technology firms often sell their research, in the form of patents, in return for shares or share options rather than cash. When that happens they may not have the cash to pay tax on the proceeds of the sale.

“Allowing firms to spread the tax over three years will ease their cash-flow problem and help them to forecast their provisional tax accurately, thus avoiding use-of-money interest charges. It will be of particular help to new technology firms.

“The change will be included in the first taxation bill to be introduced next year and, once enacted, is expected to apply from 1 April 2007,” Dr Cullen said.

ENDS

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