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It is worth noting that the proposal is not a replacement for the 15% R&D tax credit which was repealed with effect from 2010.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