Are you part of a supplier rebate scheme that provides gift cards or products as rewards for purchasing goods and services? Think gift cards, tools, or products offered when you spend with suppliers — there’s fresh guidance from the IRD you need to know.
The IRD has confirmed that if you convert your supplier rebates into rewards (like a $500 gift card or a new drill), those rewards count as taxable income for your business.
Why does this matter? If you fail to declare these rewards, if they are not showing up in your accounts, you could be exposed during an IRD audit. The ruling helps remove the guesswork, ensuring business owners treat these incentives correctly in their accounts.
The IRD direction differentiates between:
- ‘Open Loop’ cards – are money as they can be redeemed at the majority of retailers.
- ‘Closed Loop’ cards – are money’s worth as they are specific to a retail chain.
- ‘Network’ cards – are in between open and closed loop cards and can be redeemed at any retailer within a defined area such as a shopping mall, business district or town.
The gift cards or products are sometimes given to employees. Open loop cards are PAYE income payments to the employee; whereas closed loop cards and products are fringe benefits.
In short: if it feels like income, the IRD wants to treat it like income — and that means you’ll need to declare it.
Email us at info@engineroomca.co.nz to find out how this guidance might apply to you and your business.
