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On 25 October 2018 the Government introduced the Taxation (Research and Development Tax Credits Bill) to Parliament.
This Bill proposes to introduce a tax credit to incentivise business to invest in research & development (R&D).
The Bill outlines who is eligible for an R&D tax credit. The key requirements are that a person:
There must be a core activity for an R&D activity to be eligible. A core activity is an activity that:
An activity that is not a core activity will only be eligible if it is in support of a core activity. Some activities are explicitly excluded from being core or supporting activities.
To be eligible a person who qualifies must spend at least $50,000 on R&D in a given year. The maximum amount of expenditure that is eligible for a tax credit is $120 million, unless the person has been given approval from Inland Revenue to exceed the cap. The amount of the tax credit is equal to 15% of the R&D expenditure.
R&D expenditure includes employee salaries, consumables used in the R&D process and depreciation of assets used in the R&D process.
The tax credit will apply from the 2019/2020 income year.