Tax credit for R&D
As of April 1, 2016 the Taxation Annual Rates for 2015-16, Research and Development, and Remedial Matters Act 2016 introduced new rules, allowing start-up companies engaging in intensive R&D to cash out their tax losses for R&D expenditure in a given year.
During the 2008 – 2009 income year a 15% tax credit was available for eligible R&D activities. Generally a 100% deduction amount applies for amounts expensed for financial reporting purposes. The commercialisation and development of innovative technologies are supported by the government through various grant funding initiatives.
As of April 1, 2016:
- R&D start-up companies are eligible to receive a payment for up to 28% (the current company tax rate) of their tax losses for R&D expenditure;
- Company must be a loss-making company and resident in New Zealand;
- Sufficient proportion of labor expenditure must be on R&D costs;
- Losses cashed out are capped at NZD500,000 for the 2015-2016 year, this will increase over the next five years to a cap of NZD 2,000,000.
During the 2008 – 2009 income year only a 15% tax credit was available for eligible expenditure in relation to R&D activities undertaken. If claiming this deduction taxpayers has until 31 March 2012 to submit their R&D tax credit claim. Currently, a 100% tax deduction is available for R&D expenditure where the expenditure meets one of the following:
- Classified as R&D expense under NZIAS 38 for financial reporting purposes; or
- Written off for financial reporting purposes as immaterial, but classified as R&D expense under NZIAS 38; or
- Does not exceed $10,000 during the year, is written off as an immaterial amount for financial reporting purposes and is recognized as an expense for financial reporting purposes.
To assist with the creation and commercialization of innovative technologies, there are a number of various grants available:
- Technology development grants
- targeted at medium to large research intensive firms if they are able to show that their activities result in spill over effects and wider benefits to New Zealand. The government will contribute grant funding equal to 20% of the firm’s expected R&D expenditure for a period of three years (up to a maximum of $.24 million per annum).
- To be eligible claimants must: have an R&D intensity level of 3% (measured as a ratio of R&D expenditure to revenue) over a 3 year period; revenues of $3 million or greater per annum; ability to demonstrate strong R&D management capabilities; R&D program like to generate significant benefits for the community through high-value products and services.
- Technology Transfer Vouchers
- Aimed at assisting smaller firms without resources to perform R&D in-house, by giving them a voucher for up to 50% of an eligibile R&D projects costs, to be redeemed at an accredited research organisation.
- Project funding
- Available for companies undertaking R&D projects to develop new technology products, processes or services. Funding is generally granted on a 50/50 co-funding basis.
- Capability funding
- Aimed to fund employing students on fellowship or internships, and to engage world-class experts to build R&D capability.
Swanson Reed offers the following services:
- Advice on tax preparation relevant to claiming the R&D tax credits incentive
- Preparation of documents relating to filing and substantiating a R&D taxation claim
- R&D tax advice and consultations
- R&D tax claim planning and preparation
For a full range of services in relation to the credit, please click here.