Tax Experts Supportive Of A New 12.5% R&D Tax Credit

Tax experts have indicated that the government’s proposed introduction of a 12.5% R&D tax credit is a welcome move for New Zealand. The Taxpayers’ Union Executive Director has praised this government policy and has stated that the Science Research and Innovation Minister is a taxpayers’ hero. David Snell, Executive Director of EY added that the new policy changes the previous mindset around taxation.

Snell stated that tax in recent years had been broad-based, had low rates, and provided no incentives. but that the proposed tax credit would incentivize innovation. He stated that tax incentives could make a significant difference, both to R&D and to businesses’ mindsets in that businesses could begin to consciously think whether their activities can be considered as innovative.

From 1 April 2019, businesses will be able to claim tax credits of up to $120 million of R&D expenditure per year. To be eligible, businesses must have conducted the R&D in New Zealand, claim R&D expenditure relating to that business and own the results of the R&D. They must describe the core activities that are conducted using scientific methods as well as supporting activities that relate to the core activities.

This R&D tax credit will differ to the one trialed in 2008 with the government working to fine tune the system before it is introduced. For instance, it will focus on transparency, so the name of companies who receive the incentive will be published (the amount will remain confidential).

The credit will be capped at $15 million per annum, and eligible expenditure must be over $100,000 in that tax year.