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If you have an interest in a petroleum mining or exploration permit or licence, including any interest received through a farm-in arrangement, you should register with us. You can do this by completing an IRD number application - resident non-individual (IR596).
If you are intending to employ people in New Zealand, you will also be required to complete an Employer registration (IR334) form.
In New Zealand, companies are required to charge GST on any goods and services supplied. To be able to obtain any refunds for GST paid on goods and services acquired, you will need to register for GST by completing the GST registration (IR360) form.
Companies are required to file income tax returns on an annual basis. The standard income year starts on 1 April and ends on 31 March. A company may request a change to the balance date. Filing dates depend on whether the company has a tax agent.
The consideration received by the seller is income and a deduction is available to the purchaser.
Income Tax Act 2007
Exploration expenditure is generally deductible in the income year it is incurred.
There are two methods of allocating development expenditure:
The reserve depletion method means all development expenditure can be allocated over the life of the field (based on proven and probable 2P reserves) as the petroleum reserves deplete. In this way, deductions for development expenditure better match the field’s decline in value. However this method is only able to be used:
It is also important to note any election to use this method is irrevocable.
Development expenditure allocated to future income years may become deductible in full in the income year in which the permit is relinquished or disposed of for consideration. Special provisions will apply if the permit is disposed of to an associated person or a person holding the permit on behalf of the petroleum miner or a person associated with them.
Costs relating to failed production wells are deductible in the year of abandonment, instead of deductions being spread over seven years. Where a dry production well is drilled, an immediate deduction can be claimed in the year that the well is abandoned. A deduction for the remaining well development expenditure can be claimed in the year that the production well ceases producing and is abandoned, if the taxpayer is allocating development expenditure under the reserve depletion method.
Income Tax Act 2007
A petroleum miner, who has a net loss, is eligible for a tax credit for the following:
The maximum tax credit will be limited to income tax paid by the petroleum miner (or a consolidated group it is a member of) in prior years.
The tax credit applies for the 2018-19 and subsequent income years.
A petroleum miner must notify Inland Revenue before filing a return that includes this tax credit.
If production restarts, any expenditure that was accelerated due to the permanent cessation of production will be added back as income in the year commercial production restarts irrespective of whether it qualified for a tax credit, but only to the extent the expenditure was on assets used in the restarted production.
Income Tax Act 2007
Any expenditure incurred in relation to a foreign petroleum mining operation is only able to be offset against foreign-sourced income from petroleum mining operations. A tax credit for decommissioning of foreign petroleum mining operations is limited to New Zealand income tax paid on those operations.
Income Tax Act 2007
If you are a person, company or other entity who:
then it is likely that you will have withholding tax implications.
This does not apply to contracts of service between an employer and employee.
Find out more about your obligations as a non-resident contractor