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Income Tax Act 2007

Tax credits and other credits - Research and development tax credits

LY 4: Calculation of tax credit

You could also call this:

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

You can get a research and development tax credit if you spend $50,000 or more on eligible research and development in a tax year. This can include money spent on joint ventures you’re part of. You can also get the credit if you pay an approved research provider to do research and development for you.

To work out your tax credit, you multiply your total eligible research and development spending by 0.15. This means you get 15% of what you spent as a tax credit.

There’s a limit on how much you can claim. Your total eligible spending for the tax credit can’t be more than $120 million, unless you have a special approved cap that’s higher. Also, you can’t claim more than what you actually spent on eligible research and development in that income year.

When figuring out if you qualify and calculating your credit, ignore some rules about how partnerships and look-through companies are usually treated for tax. Instead, treat the partnership or company as if it were you.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS199239.

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LY 3: When this subpart applies, or

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

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LY 5: Eligible research and development expenditure, or

“What costs can be claimed for research and development tax credits”

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

LY 4Calculation of tax credit

  1. This section applies for a tax year and a person, ignoring, for purposes of this subsection only, sections HB 1 and HG 2 (which relate to entity transparency) and substituting as the relevant person the person’s partnership or look-through company, when—

  2. the person’s eligible research and development expenditure, together with eligible research and development expenditure for any joint venture of which the person is a member, is $50,000 or more for the year:
    1. the person has, for the year, eligible research and development expenditure for an approved research provider performing a research and development activity on behalf of the person.

      1. A person’s research and development tax credit for a tax year is calculated using the formula—

        0.15 × total eligible R & D expenditure.

        Where:

        • In the formula, total eligible R & D expenditure means the lesser of—

        • $120 million, or the person’s approved research and development cap if the person has an approved research and development cap:
          1. the total amount of the person’s eligible research and development expenditure for the corresponding income year.

            Notes
            • Section LY 4: inserted, on , by section 10 (and see section 3 for application) of the Taxation (Research and Development Tax Credits) Act 2019 (2019 No 15).