|Author: Amanda Visser (Business Day)
Proposed changes to the definition of the research and development tax incentives have been toned down or not included in the Taxation Laws Amendment Bill that was tabled in Parliament at the end of last month.
Tax experts widely welcomed the revised approach by the Treasury from the initial draft version that was released in July. The previous definition would have excluded all research and development that did not qualify as “world-beating”.
MD of Catalyst Research Solutions Dov Paluch said the government held a workshop with role players and seemed to have paid attention to the concerns raised by industry. There seems to be a softer approach towards IT developments and the legislation now provides room for the science and technology minister to declare certain activities as research and development.
Issues that the minister could designate as research and development include clinical trials, which have been contentious, and generic medicine, he said.
According to Izak Swart, tax director in the research and development division of Deloitte, most of the definition of research and development as it was on October 1 last year was retained. The Treasury seems to have taken a more practical approach to research, with fewer changes than expected.
“The legislation is becoming more stable, which offers taxpayers greater certainty and a better chance of interpreting it correctly,” Mr Swart said on Friday.
The definition that was tabled before Parliament include “systematic investigative or systematic experimental activities” of which the result is uncertain for the purpose of creating an invention, design or computer program that is innovative in nature.
It also includes a “significant and innovative improvement” to any invention, functional design or computer program that will improve performance, reliability or quality.
In terms of the previously proposed definition, these improvements would not have qualified for the incentive.
Mr Swart said under the previous definition a manufacturing company that wanted to “reverse-engineer” new international technology to improve its efficiency, would not have qualified.
Non-qualifying research and development includes routine testing, analysis and collection of information, and the development of internal business processes unless they are intended for sale to third parties.
Oil and gas exploration or prospecting, except for research that is aimed at developing technology used for the prospecting and the creation of financial instruments or financial products, also do not qualify.
Mr Paluch said they were awaiting regulations and guidelines from the Department of Science and Technology in order for industry players to submit clear and better defined applications.
Mr Swart said he found it unusual that the entire 150% tax deduction would in future have to be approved by the department because until now, only the additional 50% deduction had to be approved.
South Africa has set a target of spending 1.5% to 2% of gross domestic product on research and development in five years’ time. The country is currently spending less than 1% on research and development.
This article was first published on businessdaylive.co.za
Search Tax Database
Employee Tax Calculator
Subscribe to Blog via Email
Latest Tax News
- Amendments to the Special Voluntary Disclosure Programme
- Value-added tax: SARS takes away on take-away
- Good news for employers: increase in thresholds for exemption of employer-provided bursaries
- Where there’s smoke there’s fire (and carbon tax) – National Treasury releases the Draft Regulations: Carbon Offsets
- Exchange control circular issued in respect of special voluntary disclosure programme
- About mines and houses: a ruling on expenditure incurred to implement a housing scheme
- Beware of tax on dividend stripping and manipulation of dividend rights
- Reinstatement of a deregistered company in the context of an amalgamation transaction
- High Court (Gauteng Division, Pretoria) decision on whether SARS is no longer bound by a compromise agreement in the circumstances under consideration
- Supreme Court of Appeal decision on whether grapes delivered to a co-operative winery, pressed and pooled, constitute produce held and not disposed of for purposes of the First Schedule to the Income Tax Act
- Budget 2013/14 (35)
- Budget 2014/15 (42)
- Budget 2015/16 (33)
- Budget 2016/17 (42)
- Capital Gains Tax (52)
- Carbon Tax (42)
- Corporate Tax (167)
- Court Cases (219)
- Davis Tax Committee (16)
- Dividend Tax (57)
- Donations Tax (18)
- Employment Tax Incentive (9)
- Estate Planning (5)
- Fringe Benefits (17)
- GAAR (149)
- Income Tax (314)
- International Tax (178)
- Interpretation Notes (81)
- Medical Tax Credits (8)
- Mergers & Amalgamations (12)
- MTBPS October 2013 (18)
- MTBPS October 2014 (9)
- MTBPS October 2015 (6)
- Objections & Appeals (113)
- OECD – BEPS Project (41)
- Public Benefit Organisation (18)
- REIT (7)
- Retirement (43)
- SARS Binding Rulings (67)
- Share Incentive Scheme (44)
- Shares (50)
- Tax Administration (275)
- Tax Free Savings Account (11)
- Tax Returns (154)
- Taxation Laws Amendments (57)
- Transfer Duty (9)
- Transfer Pricing (37)
- Trusts (38)
- Uncategorized (130)
- VAT (123)
- Venture Capital (3)
- Voluntary Disclosure Programme (8)
- Withholding Tax (25)
SARS Key Dates
25-05-2016 - VAT manual submissions and payments
30-05-2016 - Excise duty payments
31-05-2016 - VAT electronic submissions and payments
31-05-2016 - Provisional Tax Payments
07-06-2016 - PAYE submissions and payments
24-06-2016 - VAT manual submissions and payments
29-06-2016 - Excise duty payments
30-06-2016 - VAT electronic submissions and payments
30-06-2016 - Provisional Tax Payments
07-07-2016 - PAYE submissions and payments