R&D tax credit: questions and answers
1 Why is the R&D tax credit being introduced?
The credit is intended to encourage New Zealand businesses to invest more in
R&D, to innovate and develop improved products and processes. This is expected
to have wider benefits for the New Zealand economy and boost productivity and
The credit is one of the business tax reforms that are a substantial and important
part of the government’s Economic Transformation agenda. The aim is to have a
sustainable economy built on innovation and quality, producing the kinds of
products for which other countries will pay a premium. The business tax reforms
are intended to help foster an environment that enables New Zealand businesses
to grow and compete in a global economy.
The Business Tax Review is a key feature in the government’s Confidence and
Supply Agreements with United Future and with New Zealand First.
2 Who will get the credit?
New Zealand businesses undertaking R&D on their own account or outsourcing it
will be eligible. They will have to incur at least $20,000 of eligible expenditure in
the year a claim is made unless the R&D is outsourced to a listed research
provider. Businesses will be eligible, regardless of their legal structure, if the R&D
is carried out predominantly in New Zealand. It is expected that up to 2,500
businesses could start claiming the credit.
3 How much is the credit?
The credit will be 15 per cent of the claimant’s total eligible expenditure for the
year. Income tax deductions for the expenditure will not be reduced by the amount
of the claim received in relation to the expenditure.
4 What is R&D?
For the purposes of the tax credit, R&D is activity that is systematic, investigative
and experimental which seeks to resolve scientific or technological uncertainty or
that involves an appreciable element of novelty and that is carried on for the
purposes of acquiring new knowledge or creating new or improved materials,
products, devices, p