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20 November 2013

Tax & Accounting Rules. Cloud Migration. 20 November 2013. It’s a bit of a mess really. 20 November 2013. Let’ start with… 1993 Policy statement from the Commission of IR Software developed in-house for business use Pre-development expenses may be deducted

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20 November 2013

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  1. Tax & Accounting Rules Cloud Migration 20 November 2013

  2. It’s a bit of a mess really. 20 November 2013

  3. Let’ start with… • 1993 Policy statement from the Commission of IR • Software developed in-house for business use • Pre-development expenses may be deducted • Development expenses must be capitalised until project completed, and then depreciated • Costs of unsuccessful development may be deducted • Maintenance costs may be deducted • Cost of upgrades must be capitalised and depreciated 20 November 2013

  4. Software developed for sale or licence • Development costs deductible in year incurred • Value of unbilled work in progress and unsold completed software must be taken into account as trading stock i.e. income • Costs are effectively trading stock until the first sale is made • WEIRD! • How does this apply to cloud? 20 November 2013

  5. IR back track! • Pre 1994 Policy statements not reliable • Deduction is 1993 Policy statement for fail software projects “wrong”… • The government response, ‘well, we will just change the law, and back date it!’ 20 November 2013

  6. Late 1990’s • Some new R+D tax rules • Simply follow accounting for tax deduction 20 November 2013

  7. Accounting Treatment • Revenue • Generally spread over the term of the software service • Costs • Research costs, expense • Development costs, expense if don’t meet the capitalisation criteria 20 November 2013

  8. Accounting Treatment (FRS, NZ IFRS is similar) • Revenue • Generally spread over the term of the software service • Costs (tax can following) • Research costs, expense • Development costs, expense if don’t meet the capitalisation criteria • Capitalise as an asset if do meet the criteria • Opportunity to defer expenses for tax purposes • Grants • Be aware, many opt not to apply the above accounting standards 20 November 2013

  9. Tax – The Latest (Hot off the press) • Black hole expenditure discussion document from the IR • Looking to fix a number of problems – good • Not all of the issues are addressed – bad 20 November 2013

  10. International Tax - 101 20 November 2013

  11. Thank you

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