“Activities that are not allowed as research and development in New Zealand”
When you look at the Income Tax Act 2007, you will see a schedule called Proscribed R&D activities. This schedule tells you what activities are not allowed as research and development. You can find the definitions of R&D expenditure and R&D material in s YA 1.
You are not allowed to claim activities that happen outside of New Zealand. This also includes things like buying or selling land, unless the land is only used for research or development. You cannot claim activities like prospecting for minerals or drilling for oil.
Some other activities that are not allowed include market research, quality control, and making small changes to products. You also cannot claim routine tasks like collecting information or doing management studies. These activities are all listed in the Proscribed R&D activities schedule.
Schedule 23: Meaning of permanent establishment, or
"A permanent establishment is a fixed place where a business works, like an office or factory."
22Proscribed R&D activities Empowered by
s YA 1, definitions of R&D expenditure, R&D material
The following table is small in size and has 2 columns. In the table, the first column gives the number of the row. The second column describes the proscribed R&D activity.
1
An activity performed outside of New Zealand.
2
Acquiring or disposing of land, and related activities, except if the land is used exclusively for housing research or development facilities.
3
Acquiring, disposing of, or transferring intangible property, core technology, intellectual property, or know-how, and related activities (for example, drafting sale and purchase agreements for patents).
4
Prospecting for, exploring for, or drilling for, minerals, petroleum, natural gas, or geothermal energy.
5
Research in social sciences, arts, or humanities.
6
Market research, market testing, market development, or sales promotion, including consumer surveys.
7
Quality control or routine testing of materials, products, devices, processes, or services.
8
Making cosmetic or stylistic changes to materials, products, devices, processes, or services.
9
Routine collection of information.
10
Commercial, legal, and administrative aspects of patenting, licensing, or other activities.
11
Activities involved in complying with statutory requirements or standards.
12
Management studies or efficiency surveys.
13
Reproduction of a commercial product or process by a physical examination of an existing system or from plans, blueprints, detailed specifications, or publicly available information.
14
Pre-production activities, such as a demonstration of commercial viability, tooling-up, and trial runs.
