Income tax treatment of the screen production industry under the Income Tax Act 2004: Part II - Income from films: section CC10

Chapter 2 - income from films

2.1 Section CC 10 deals with income from films. Where a person has a "right or interest" (as described in section CC 10(2)) in or to certain tangible assets relating to a film (set out in section CC 10(1)), the following amounts are included in income of the person (section CC 10(3)):

1. an amount received or receivable by the person for-
   1. the use of, or the right to use, the film or a right or interest in a right in the film:
   2. the granting of a licence for a future right in the film:
   3. the disposal of some or all of a right or interest in a right in the film:
   4. the assignment of a right or an interest in a right:
   5. the assignment of a right to derive income from the use of a right or interest; and
2. an amount derived by the person from the rental, sale, use, or other exploitation of the film.

2.2 Section CC 10 applies when a person has a "right or interest" in or to certain tangible assets relating to films, including (section CC 10(1)):

1. a film; or
2. a print of the film; or
3. publicity material for the film; or
4. any other tangible asset relating to the film.

2.3 The "right or interest" is a right or interest, including a future or contingent right or interest, of any of the following kinds (section CC 10(2)):

1. copyright in the film:
2. licence relating to the copyright:
3. an equitable right in the copyright:
4. an equitable right in a licence relating to the copyright:
5. any other right existing in or attaching to the film:
6. a right to income, or a share of income, from the rental, sale, use, or other exploitation of the film.

2.4 Section CC 10 is, however, overridden by section FC 21 (Amounts derived by non-residents from renting films), under which only 10 per cent of the amounts derived from New Zealand by a non-resident from certain activities is income of the non-resident person. These activities include (section FC 21(1)):

1. renting, exhibiting, or issuing a film, or making other arrangements for its exhibition:
2. selling or hiring film containers, cinematographic or photographic materials, or equipment or accessories relating to a film:
3. selling or hiring advertising materials relating to a film.

2.5 The rest of the amounts derived from such activities are exempt income of the non-resident person (section FC 21(2)).

2.6 The non-resident person is denied a deduction in relation to an amount to which section FC 21 applies (section FC 21(3)).

2.7 Section FC 21 does not apply to a non-resident person if the amounts derived by them from those certain activities are an insignificant proportion of the total amounts derived by them from any business carried on in New Zealand or elsewhere (section FC 21(4)).

Date published: 18 Nov 2005

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