• Service: Tax, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 8/2/2013

New Zealand - Proposals for start-up R&D tax loss refunds 

August 2:  New Zealand’s government earlier this year proposed allowing tax losses arising from research and development (R&D) expenditures to be refunded (i.e., “cashed out”) up to a certain limit. The “R&D tax loss refund” proposal was aimed at R&D-intensive start-ups.

An issues paper has been released with further detail on the proposal, and includes:

  • A proposed definition of “R&D-intensive start-ups” as companies that spend at least 20% of their salary and wage amounts on qualifying R&D activities
  • A proposed definition of “qualifying R&D expenditure” as one that generally follows the existing “research” and “development” definitions used for tax purposes (with certain specific carve-outs)
  • A rule that the amount to be “cashed out” would be limited to the lesser of (1) 1.5 x R&D salary costs, (2) total tax losses, or (3) qualifying R&D spend—up to a maximum refund of NZ $140,000 initially

KPMG observation

It has been noted that the R&D tax loss refund proposal would not be a replacement for the 15% R&D tax credit that was repealed effective 2010. The repealed R&D tax credit regime was clearly intended to be a tax incentive. The R&D tax loss refund, in contrast, is aimed at helping companies with their early stage cash-flow (it will “claw back” the tax benefit when the company makes a return on its R&D investment). There is, therefore, still a question concerning whether there is a role for R&D tax incentives to help New Zealand’s best and brightest firms innovate.

Read an August 2013 report [PDF 117 KB] prepared by the KPMG member firm in New Zealand: Refund of R&D tax losses

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