Since its enactment in June 2019, the R&D (research and development) tax credit scheme is currently in its fourth year of running (with application from the 2020 income year). The scheme provides a 15% credit on your R&D costs and can be applied by a company that is either profit-making or loss-making. For companies making losses, the tax credit can be refunded provided certain thresholds are satisfied.
From an operational perspective, the applications under the R&D tax credit scheme are rigorously reviewed by Callaghan Innovation (general approval application) and Inland Revenue (R&D supplementary return). As we have assisted our clients since the first R&D filings (for their 2020 income year), we consider that it is a smoother process compared to the early days, albeit recognising that it is still a longer review time frame under the R&D tax credit scheme compared to the R&D tax loss cash out scheme.
Another add-on that the NZ Government has implemented for the R&D tax credit scheme is the “R&D in-year payment scheme” which launched in April this year. Tax Management New Zealand administers the “R&D in-year payment scheme” and aims to pay out 80% of the R&D tax credit (in the form of an R&D interest-free loan) within the current financial year of a company doing R&D – certainly helpful for companies who are often in start-up mode and accessing the R&D tax credit scheme. If the company is loss-making, it should also consider accessing the R&D tax loss cash out scheme in addition to the R&D tax credit scheme.
For more information our corporate Findex have put together an R&D brochure for on the R&D tax credit scheme. If you want to know more, reach out to Katherine Ong at Findex NZ.
The views and opinions expressed in this article are those of the author/s and do not necessarily reflect the thought or position of Findex.
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