Tax deductions for SA-based R&D
SOUTH AFRICA’S GOVERNMENT is trying to encourage research and development activities by announcing far-reaching amendments to the Income Tax Act.
The amendments provide for a tax deduction of up to 150% for expenditure on R&D activities undertaken in SA. The amendments set out various categories of R&D work that qualify for the deduction. However, in broad terms, if the R&D is of a scientific or technological nature almost all categories of expenditure incurred are tax deductible.
“That would even include funds spent on plant and equipment,” says Chris Bull, chairman of the executive at Spoor & Fisher.
“From an intellectual property perspective it’s important to note that all patent and intellectual property costs incurred relating to the R&D are deductible.
The reasoning is that Government is trying to encourage businesses engaged in R&D to protect the concepts and inventions developed through research work.”
Bull says certain R&D categories don’t qualify for the deduction, such as exploration and prospecting, R&D related to management and internal business processes, trademarks, work concerning social sciences and humanities and market research, sales and marketing promotion.
“It’s also important to note that where the R&D is funded by Government grants the 150% deduction will only be allowed where the expenditure exceeds twice the amount of the Government grant.”