Income tax treatment of the screen production industry under the Income Tax Act 2004: Part I - Background

Chapter 1 - Introduction

1.1 The New Zealand screen production industry is subject to special income tax rules under the Income Tax Act 2004 ("2004 Act"). This is in line with the Government's efforts to encourage the development of the New Zealand screen production industry. A recent development is the introduction of the large budget screen production grant scheme in November 2003.

1.2 The 2004 Act came into force from 1 April 2005. The new Act rewrites Parts C to E and Part Y of the Income Tax Act 1994 and makes consequential amendments to Parts A, B and F to O. The key objective of rewriting the Act is to produce tax legislation that is clear, uses plain language and is structurally consistent.The 2004 Act is not intended to contain any changes in policy, with the exceptions listed in schedule 22A.

1.3 This paper will provide an analysis of the income tax treatment of the screen production industry under the 2004 Act. All legislative references are to the 2004 Act, unless otherwise stated. Following the structure of the 2004 Act, this paper covers the following topics:

• income from films: section CC 10;
• deductions and timing rules in relation to film industry expenditure: sections DS 1, DS 2 and EJ 4 - EJ 8;
• deferred deductions relating to money not at risk: sections GC 29 - GC 31;
• specific anti-avoidance provisions in relation to films: sections GC 11A, GC 11B, GD 12, GD 12A and GD 12B; and
• the large budget screen production grant scheme.

1.4 A diagram showing how these topics interact is included in Appendix A.

Date published: 18 Nov 2005

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