Organisation for Economic Co-operation and Development

NEW ZEALAND: GENERAL METADATA Data documentation General notes The fiscal year in New Zealand runs from 1July to 30June. Following OECD convention, data are allocated to the starting calendar year so that data covering the period July 2005 to June 2006 are allocated to 2005. Producer Support Estimate New Zealand’s fiscal regime applicable to the oil and natural-gas industry combines a corporate income tax and royalty-based taxation. The corporate income tax amounts to 28% of taxable income, where taxable income is defined as any assessable income less deductions and net losses, the latter of which can be carried forward indefinitely. Generally, companies cannot deduct expenditures of a capital nature when incurred. However, deductions for certain exploration and development expenditures of a capital nature are available for oil and natural-gas companies (see Tax Deductions for Petroleum-Mining Expenditures). Depending on the year of the discovery, different royalty regimes apply. For discoveries made on or after 1995, royalties are set out in detail in the 2005 Minerals Programme for Petroleum and comprise of the following: an ad valorem royalty (AVR) component of 5% payable on the basis of either a sales price received or, where there has been no sale or no arm’s length sale, the deemed sales price; and an accounting profits royalty (APR) component of 20% payable on the difference between revenue received from the sale of products and the costs of extracting, processing and selling those products up to the point of sale. In case of an exploration permit, the permit holder is liable to pay only the AVR. For all mining permits with net sales above NZD1 million, the permit holder is required to calculate for each period for which a royalty return must be provided to both the AVR and the APR, and pay whichever is higher. Typically, AVR is paid in the early years of production as prior costs are netted against revenue and at the end of the field’s life, as production falls. APR is typically paid during the peak years of production of non-marginal fields. In order to encourage exploration for new natural-gas reserves, the government reduced royalty rates from June 2004 through 31December 2009 (see Reduction in Royalty Payments for Petroleum). For discoveries after 31 December 2009, the same royalty rates that are in operation before 30 June 2004 are applicable. More generally, royalties are payable for petroleum that is (1) discovered and sold, (2) used in the production process as fuel, (3) exchanged or transferred out of permit boundaries without sale or (3) left unsold at the expiry of the permit (Ernst and Young, 2013). No royalties are payable on petroleum that is flared or returned to natural reservoirs within the permit boundaries (e.g. the re-injection of gas). In 2008, the government introduced an emissions trading scheme (ETS) for greenhouse gases. Legislation for the scheme has been subsequently amended with the latest enacted in 2012. There are no special exceptions for the oil and gas sector under the current ETS regime.