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NZ Legislates For New Research And Development Tax Incentive

Friday, October 26, 2018

The New Zealand Government has introduced legislation to implement a new research and development tax incentive.

The Taxation (Research and Development Tax Credits) Bill will introduce an R&D tax credit from the 2019-20 income year. The Coalition Agreement between Labour and New Zealand First sets a goal of increasing R&D spending to two percent of GDP by 2028.

The tax credit will be equal to 15 percent of eligible R&D expenditure. There will be a NZD120m (USD78.2m) cap on eligible expenditure and a minimum R&D spending threshold of NZD50,000 per year.

To be eligible for the tax credit, a person must perform a core research and development activity in New Zealand, carry on a business through a fixed establishment in the country, and have R&D controlling rights over their R&D activities.

In addition, they must satisfy at least one of the following conditions: they must own the results of their R&D activities; be able to use the results of their R&D activities for no further consideration; or a company in the person's corporate group owns the results of their R&D activities and that company is resident in a jurisdiction with which New Zealand has a double taxation agreement.

A core R&D activity is an activity that: is conducted using a systematic approach; has the purpose of creating something new; and has the purpose of resolving scientific or technological uncertainty.

Research, Science, and Innovation Minister Megan Woods said: "The R&D tax incentive is a key lever for addressing the critical issues New Zealand is facing. We need new solutions to combat issues like climate change, child poverty, and homelessness. Research and development will help us find the solutions to these problems."

"The tax credit will also incentivize businesses to do more R&D, creating more high value jobs and lifting household incomes."

Revenue Minister Stuart Nash said: "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 grow innovation by supporting businesses to undertake genuine R&D."