New Zealand Reveals Details of New R&D Tax Incentive

New Zealand Reveals Details of New R&D Tax Incentive

New Zealand Government has revealed details about the new research and development (R&D) tax incentive aimed at encouraging businesses to invest more in R&D activities.

The rate for the tax incentive will be set at 15 percent for income years starting 2019-20. All businesses, regardless of legal structure, will be eligible to claim the tax incentive.

A business will need to spend a minimum of NZD50,000 on eligible expenditure, within one year, to qualify for the tax incentive.

A business will be able to claim a tax credit for up to NZD120m of R&D expenditure each year.

Firms will be eligible for a refund of their tax credit for R&D expenditure of up to NZD1.7m subject to certain conditions. Tax credits not refunded will be carried forward.

The Government would introduce legislation in this regard by early November, 2018.

Megan Woods, Research, Science and Innovation Minister, said: “We listened to the business community. We ran a thorough consultation process and as a result we have made significant changes to the tax incentive originally proposed. The rate will be higher, the threshold lower, and the definition more inclusive. This is a huge opportunity for businesses to invest in R&D, which will help us increase our productivity and boost wages.”

“We pride ourselves on being an innovative country, but our spending on R&D lags behind many of our international competitors, and this Government is not content to languish at the bottom of the table. That’s why we’ve set aside NZD1bn for this incentive.”

Revenue Minister Stuart Nash said these features struck a balance between including as many businesses as possible in the scheme, and upholding the integrity of New Zealand’s tax system.

“We have learned from international best practice how to incentivize R&D expenditure and retain trust and confidence in the tax system. The new policy meets the rigour of international schemes, and will support businesses to undertake genuine R&D,” Nash said.

The Minister added: “We received a lot of feedback from businesses that it was particularly important to include a form of refundable tax credits for start-ups and loss making businesses in the first year of the tax incentive. This is why we have introduced a temporary measure that will mirror the current R&D tax-loss cash-out scheme.”

“I can assure all businesses that having a more comprehensive form of refunds in the R&D tax incentive is a high priority to have in place for the 2020 tax year,” Nash said.