New Zealand


  • Service: Tax
  • Type: Business and industry issue
  • Date: 2/08/2013

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Taxmail - Refund of R&D tax losses 

Issue 1 - August 2013


In the Budget, earlier this year, Government proposed allowing tax losses arising from Research and Development ("R&D") expenditure to be refunded ("cashed out") up to a certain limit. The proposal was aimed at R&D intensive start-ups.  


Taxmail discusses the detailed design of the proposal and its implications for business.

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An Officials’ issues paper has now been released with further detail on the proposal, including:


  • The definition of “R&D intensive start-up”: it is proposed that this will be companies that spend at least 20% of their salary and wage bill on qualifying R&D activity.


  •  The definition of qualifying R&D expenditure: this will broadly follow the existing “research” and “development” definitions used for tax purposes (with certain specific carve-outs).


  • The amount to be “cashed out”: this will be limited to the lesser of 1.5 x R&D salary costs, total tax losses and qualifying R&D spend, up to a maximum refund of $140,000 initially.


It is worth noting that the proposal is not a replacement for the 15% R&D tax credit which was repealed with effect from 2010. That was clearly intended to be a tax incentive.  


The R&D tax loss refund, in contrast, is aimed at helping with early stage cash-flow (it will claw back the tax benefit when the company makes a return on their R&D investment).  


There is, therefore, still the question of whether there is a role for R&D tax incentives to help New Zealand’s best and brightest firms innovate.

Tax submissions - Submissions on draft tax legislation, Government discussion documents and issues papers, & various tax interpretation statements released by the New Zealand Inland Revenue. 
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