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R&D Tax Credit bill was introduced earlier last year. The main purpose of this bill was to ensure New Zealand business can get tax credits for eligible spend on R&D expenses. It includes 15% tax credit with a $120 million cap on eligible expenditure, and a minimum expenditure threshold of $50,000 per year. The Government estimated 2000-3000 can benefit for this scheme.  The enactment date of which has now been brought forward. So, the application date now is 2019-20 tax year.

The enactment of the R&D Bill was in two parts Year 1(Limited Refundability) Rules and Year 2 (Broader Refundability Rules). To provide cash to businesses now and encourage them to continue with their R&D despite COVID-19, this proposed amendment would bring the application date of the broader year two refundability rules forward. This would enable more businesses to access refundable R&D tax credits and would provide some businesses with larger refunds than they would have obtained under the existing year one limited refundability rules.

A refundable R&D tax credits are available for eligible businesses who have core business activity in New The cap of R&D tax credit is total PAYE paid during the year. The regime does not include charities and tax-exempt entities.

Example in the year ended 31 March 2020, BAC Limited has eligible R&D expenditure of $1,000,000, so is eligible for $150,000 of R&D tax credits. Company has no income tax liability to offset its R&D tax credits against. During the year $200,000 of PAYE is paid for its employees. BAC is able to receive an R&D tax credit refund of $150,000.

This change will help eligible businesses to obtain tax credits sooner.


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