On 2 March 2018, the Department of Science and Technology (“DST”) attended a meeting with the newly appointed Minister of Science and Technology (Ms Mmamoloko Kubayi-Ngubane) to discuss the tax incentives for research and development.
A task team, comprising representatives from the private and the public sectors was established in 2015 to review the R&D tax incentive. The task team tabled a report in April 2016 with findings and 17 recommendations on improving the administration and implementation of the R&D tax incentive.
The meeting discussed the work of the Task Team, which made recommendations in 2016 to improve the incentive. The National Treasury and DST worked together on these recommendations and grouped them into 4 areas.
Below are the highlights that were discussed on each area:
- Simplifying the procedure – there is now an appeals process that has been incorporated into the process and the turnaround time for approvals has been drastically reduced. The aim is to reach a turnaround time of 90 days on all applications.
- Improving the pre-approval process – Although the task team recommended a move away from the pre-approval process, at the moment, the pre-approval process will remain to assess how it works with no backlogs.
- Catch up on claims – The task team recommended allowing claimants to claim prior years expenditure in current years. This was not completely adopted as the amendment that was made allows for companies to reopen returns even after prescription if the approval comes late from the DST.
- Policy Issues – This was the big one – Treasury has said that due to fiscal constraints, they are not increasing the incentive from the additional 50% and they will not allow for a refundable type benefit for SMEs. There will be some tweaking of the innovation criteria as well as the “internal business process exclusion” in the next round of draft tax legislation to provide greater clarity.
