New Zealand’s Inland Revenue has issued Interpretation Statement IS 26/10, setting out the income tax treatment of sponsorship expenditure by businesses and replacing IS3229, alongside a Fact Sheet with practical examples.
New Zealand’s Inland Revenue has issued Interpretation Statement IS 26/10 on the income tax implications of providing sponsorship on 20 Apr 2026, replacing and updating IS3229 Deductibility of sponsorship expenditure.
The statement explains how sponsorship provided by businesses to organisations, events, individuals, or causes is treated for income tax purposes and sets out when sponsorship expenditure is deductible.
Alongside this, Inland Revenue has published a Fact Sheet giving a high-level overview and practical examples of how different sponsorship arrangements are treated for tax purposes.
A key requirement for deductibility is that the expenditure must have a sufficient connection to the business’s income-earning process. This is generally satisfied where the sponsorship is intended to advertise or promote the business. Evidence of promotional intent may include the terms of the sponsorship agreement, alignment with a marketing strategy, the target audience reached, and any resulting increase in sales or income.
Where expenditure has both business and non-business elements, only the business portion is deductible and apportionment is required. If any private or third-party benefit is merely incidental to the main business purpose, a full deduction may still apply. For example, sponsorship involving logo placement on uniforms is fully deductible, while arrangements such as providing services in return for a private benefit like school fee discounts require apportionment.
Costs that are capital in nature are not deductible. While most sponsorship-related promotional costs are treated as revenue in nature, expenditure that creates an identifiable asset or provides an enduring benefit such as purchasing a vehicle retained by the business is capital. In such cases, depreciation deductions may be available over time.
Entertainment expenditure, including corporate boxes, accommodation, food, and drink, is generally subject to a 50% deduction limitation. This restriction may not apply where the entertainment is mainly provided to promote the business to the public and public access is equivalent to that of employees or business associates.
Where sponsorship spans multiple income years, deductions must be spread over the term of the agreement. Any portion relating to future years at the end of an income year is treated as “unexpired” and added back as income, then deducted in the following year, ensuring the tax treatment aligns with the period of promotion.
Sponsorship provided in the form of trading stock (goods) is deductible under trading stock rules. Businesses are generally not taxed on deemed market value income where goods are supplied for promotional purposes, donated to eligible organisations, or provided in response to adverse events. Sponsorship in the form of services is also deductible, provided there is a clear business promotion purpose.
