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Income Tax Act 2007

Tax credits and other credits - Research and development tax credits

LY 3: When this subpart applies

You could also call this:

“This section outlines who can claim tax credits for research and development in New Zealand”

This section explains when you can get tax credits for doing research and development in New Zealand. You can get these credits if:

You or a group you’re part of does core research in New Zealand, or someone does it for you in their New Zealand business.

You or your group runs a business in New Zealand.

You can use the research results for free, or you (or a related company in New Zealand or a country with a tax agreement) own the results.

Your research activity and you are approved under certain tax laws.

However, you can’t get these credits if:

You’re late filing your tax return by more than a year.

You get a Callaghan Innovation Growth Grant or are connected to someone who does.

You’re doing the research for someone else who has a business in New Zealand.

You’re connected to certain organisations like Crown research institutes, Health New Zealand, universities, or Callaghan Innovation.

You’re not living in New Zealand but are part of a joint venture or partnership here.

You’re not a levy body researcher and your income is tax-free under certain laws.

If you’re a levy body researcher, you’re treated as if you have a business in New Zealand.

There are some special rules for the 2020-2021 tax year that might let you get credits even if you normally couldn’t.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS199236.

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LY 2: Key terms, or

“Definition of core and supporting research and development activities for tax purposes”

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LY 4: Calculation of tax credit, or

“How to work out your research and development tax credit”

Part L Tax credits and other credits
Research and development tax credits

LY 3When this subpart applies

  1. This subpart applies for a person for an income year, if—

  2. the person or a joint venture of which the person is a member performs a core research and development activity in New Zealand, or, if the person does not perform a core research and development activity in New Zealand, a research and development contractor performs a core research and development activity in New Zealand on behalf of the person as part of a business that the contractor carries on in New Zealand through a fixed establishment in New Zealand; and
    1. the person or a joint venture of which the person is a member carries on a business in New Zealand through a fixed establishment in New Zealand; and
      1. the person or a joint venture of which the person is a member may use the results of the relevant core research and development activity and any related supporting research and development activities for no consideration, or the results of the relevant core research and development activity and any related supporting research and development activity are—
        1. owned by the person:
          1. if the person is a company, owned by another company that is resident in New Zealand or in a country with which New Zealand has a double tax treaty, and the other company is in the same group of companies as the person:
            1. owned by a joint venture of which the person is a member; and
            2. the relevant research and development activity and the person, as applicable, are approved under section 68CB or 68CC of the Tax Administration Act 1994 (which relate to in-year approval).

              1. Despite subsection (1), this subpart does not apply for a person, for an income year,—

              2. if they fail to file a return of income for the income year on or before the date that is 1 year after the latest date for them to file the return of income for the year under section 37 of the Tax Administration Act 1994:
                1. if they receive a Callaghan Innovation Growth Grant, or they are directly or indirectly controlled by, or associated with, a recipient of a Callaghan Innovation Growth Grant:
                  1. to the extent to which the person is a research and development contractor for another person (person B) in relation to a research and development activity, if person B carries on a business in New Zealand through a fixed establishment in New Zealand:
                    1. if the person is, or is directly or indirectly controlled by, or is associated with,—
                      1. a Crown research institute:
                        1. Health New Zealand:
                          1. a tertiary education organisation, including a foreign tertiary education organisation:
                            1. Callaghan Innovation:
                            2. if the person is a member of a joint venture or a partner in a partnership or has owner’s interests for a look-through company, and the person is not resident in New Zealand in the tax year:
                              1. if the person is not a levy body researcher and the person derives exempt income under section CW 38, CW 39, CW 40, CW 41, CW 42, or CW 55BA (which relate to exempt income).

                                1. Despite subsection (1), sections LY 1(3)(b) and LY 8 may apply to carry forward a person’s research and development tax credit.

                                2. For the purposes of subsection (1), a person that is a levy body researcher is treated as carrying on a business in New Zealand through a fixed establishment in New Zealand.

                                3. Section LZ 13 (Part-year override of section LY 3(2)(b)) overrides subsection (2)(c) for the 2020–21 income year.

                                Notes
                                • Section LY 3: inserted, on , by section 10 (and see section 3 for application) of the Taxation (Research and Development Tax Credits) Act 2019 (2019 No 15).
                                • Section LY 3(1)(d): replaced, on , by section 40(1) (and see section 38 for application) of the Taxation (Research and Development Tax Credits) Act 2019 (2019 No 15).
                                • Section LY 3(2)(d)(ii): amended, on , by section 104 of the Pae Ora (Healthy Futures) Act 2022 (2022 No 30).
                                • Section LY 3(2)(d)(iii): replaced (with effect on 1 April 2019), on , by section 163(1) (and see section 163(8) for application) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
                                • Section LY 3(2)(d)(iv): inserted (with effect on 1 April 2019), on , by section 163(1) (and see section 163(8) for application) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
                                • Section LY 3(2)(f): inserted, on , by section 163(2) (and see section 163(7) for application) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
                                • Section LY 3(4) heading: amended, on , by section 163(3) (and see section 163(7) for application) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
                                • Section LY 3(4): amended, on , by section 163(4) (and see section 163(7) for application) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
                                • Section LY 3(5) heading: inserted, on , by section 40(2) (and see section 38 for application) of the Taxation (Research and Development Tax Credits) Act 2019 (2019 No 15).
                                • Section LY 3(5): inserted, on , by section 40(2) (and see section 38 for application) of the Taxation (Research and Development Tax Credits) Act 2019 (2019 No 15).
                                • Section LY 3(5): amended, on , by section 163(5) (and see section 163(7) for application) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
                                • Section LY 3 list of defined terms exempt income: inserted, on , by section 163(6)(a) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
                                • Section LY 3 list of defined terms levy body researcher: inserted, on , by section 163(6)(a) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
                                • Section LY 3 list of defined terms non-business researcher: repealed, on , by section 163(6)(b) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).