I was wondering if anyone knew what the deal is with this. Say you have a registered NZ Ltd., the Ltd. owns a domain or website, then you sell the domain or website. What is the tax liability if any? Thanks
Adappted: I was wondering if anyone knew what the deal is with this. Say you have a registered NZ Ltd., the Ltd. owns a domain or website, then you sell the domain or website. What is the tax liability if any? Thanks
There are tax considerations if you were depreciating any of the items you are selling.
Adappted: I was wondering if anyone knew what the deal is with this. Say you have a registered NZ Ltd., the Ltd. owns a domain or website, then you sell the domain or website. What is the tax liability if any? Thanks
Realistically a question for an accountant.
IANAA, but... likely, no tax FOR THE COMPANY.
In theory having a domain name is an enduring benefit and the initial procurement of that domain (all $30 of it) should be capitalised, but in practice I imagine even the first "domain registration" is just expensed by everybody, this likely doesn't make a difference at the end of the day because in the vast majority of cases the initial "domain registration" is far under the "small items" threshold ($500?) which are written off as expense immediatly (rather than depreciating). Of course if you're buying them domain from somebody for $xxxxx then that certainly needs to be capitalised, and I doubt depreciation applies there.
As for website developmet costs that should definately be capitalised... and certainly depreciated (probably at "software" rates which I think from memory is something around 50% DV, quite rapid anyway).
Website hosting costs are expensed.
Depending on the book-status of the domain name, you would probably either just ignore it (if you expensed it all along) and take the sale cost as capital gain on the website development capitalisation, or you would split the sale cost over the website and domain name capitalisations.
When you later sell these items which have been capitalised, any gain will be capital gain and thus not income and not taxed to the company that owned it (no capital gains tax except for some certain exclusions), care is required as to how YOU get the money from the company that it does not become income for YOU and taxed to you. Accountant time!
Intent could also come into play, as in "did you develop the website with the INTENT to sell it at a profit", if so, it's quite likely "income" and taxed as income, as opposed to "did you develop the website with the intent to operate the website". This is particularly evident with those people who are in the business of making up "working" online-shop websites as "businesses" and flicking them on TradeMe "with list of suppliers" -I don't know if it's still common but used to be, the sites were just OSCommerce with some template and a few "products" to suit the template, all under the umbrella of a registered company name, "selling the company" - anyway in that situation, it's certainly not a capital gain, they are income plain and simple due to intent.
Very tricky area. You really should see an accountant before you get in a pickle here.
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