Business Tax Reform – R&D fact sheet
15 per cent tax credit to promote investment in R&D
New Zealand businesses conducting research and development – R&D – will be eligible
for a tax credit of 15 per cent of allowable expenditure.
To qualify, R&D activities must be systematic, investigative and experimental.
They must either seek to resolve scientific or technological uncertainty or involve an
appreciable element of novelty and be directed at acquiring new knowledge or creating
new or improved products or processes. Certain activities are excluded, as they are
in other jurisdictions, generally to delineate more clearly the boundary between
innovative and routine activity. Activities that support core R&D activities can be eligible.
Encouraging businesses to invest more in R&D will have wider benefits to New
Zealand. The tax credit is designed to help improve productivity and international
competitiveness, especially with Australia.
How will it work?
9 New Zealand businesses conducting R&D in New Zealand will be eligible for a credit
of 15 per cent of allowable expenditure.
9 To qualify for the credit, a business must control the R&D project, bear the financial
and technical risk of it and own the project results.
9 The R&D must be carried out predominantly in New Zealand.
9 Eligible expenditure includes the cost of employee remuneration, depreciation of
tangible assets used primarily in conducting R&D, overhead costs, consumables
and payments to entities conducting R&D on behalf of the business.
9 Ineligible expenditure includes interest, loss on sale or write-off of depreciable
property, the cost of acquiring core technology (technology used as a basis for
further R&D), expenditure funded from a government grant or the required co-funding,
expenditure on intangible assets and professional fees in determining eligibility.
9 R&D credits will reduce tax payments, and imputation credits will arise for the amount
of the reduction. R&D credits will be paid out in cash to loss