Important:
- To claim the R&D tax credit, you must submit a detailed statement online.
- In most instances, the last date for submitting a detailed statement was April 30 2010. Find out more
Compliance with statutory requirements or standards
Excluded activities
Compliance with statutory requirements or standards is excluded from being a systematic, investigative and experimental (SIE) activity for the R&D tax credit.
This exclusion targets routine testing and analysis of materials, products and processes to check that they comply with statutory requirements or standards. R&D activities that are a condition of a statutory consent or concession are also excluded from being an eligible activity, for example R&D you are required to undertake to research the impact of your activities.
Can these activities be support activities?
Checking that a new product or process meets the technical requirements of relevant statutory or other standards may be an eligible R&D support activity. However, this is only the case where the development of a new product or process involves eligible R&D activities, and checks are required to validate that the technical objectives of the eligible R&D have been met.
The costs of applying for regulatory approval for eligible SIE activities may be eligible expenses, provided the consent is granted and the activities take place. If the consent is declined, or the activities do not proceed for some other reason, the application costs will not be eligible.
To be eligible, the activities must be all of the following:
- wholly or mainly for the purpose of the SIE activities
- required for the SIE activities
- integral to the SIE activities.
Example - product testing to required standard
A company is developing an innovative process to produce an ingredient that will be used in pharmaceuticals. There is a technological uncertainty about whether the product can be produced to the international standard required using the new process. Testing the product to ensure the technology will be able to produce to the required standard is an eligible support activity.
When the manufacturing technology is developed, ongoing work to demonstrate compliance with standards would not be an eligible activity as it is no longer wholly or mainly for the purposes of SIE activities.
Note: Examples are simplified. You should check the detailed R&D information and/or consult your professional advisor.
Potentially eligible R&D
If new methods for measuring compliance with standards are developed, the activities may involve eligible R&D.
Example - development of new technology for monitoring
As a condition of its resource consent, a company is required to meet certain air quality standards.
Monitoring air standards is not an eligible SIE activity, but R&D to develop a more efficient new technology to monitor emissions could be an eligible SIE activity.
Note: Examples are simplified. You should check the detailed R&D information and/or consult your professional advisor.
New Zealand legislation
Income Tax Act 2007
- schedule 21 part C, clause 8
- LH 7(1)(b)
- LH 7(2)(b)
Date published: 30 Sep 2008
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