The R&D tax credit has been repealed, effective from the 2009-10 income year. It is still available for qualifying expenditure on R&D activities carried out in the 2008-09 income year. Find out more about the R&D tax credit repeal >
Tax agents: To file a detailed statement on behalf of a client, you must upgrade your online services user ID to access your client's detailed statement. For help, ask the online services support person or administrator in your office, or contact the R&D tax credit team.
Industry research co-operatives (IRCs) and their expenditure
What is an IRC?
An IRC is an entity that conducts or commissions research and development activities mainly for other persons or businesses. For an IRC's R&D to be eligible for the R&D tax credit, the businesses that fund the IRC must:
- carry on business activity in New Zealand related to the R&D activity
- be eligible for a tax credit if they carried on the R&D activities themselves and there was no minimum threshold
- contribute to the financing of the R&D activities by payments to the IRC, or as a levy under section 4 of the Commodity Levies Act 1990 or the Building Research Levy Act 1969.
Important
IRCs do not need to meet the requirement to be "in business".
Example - IRC funded by "payments" contributions
A small group of electrical engineering businesses in New Zealand set up a firm, Electronics Research Ltd (ERL), to plan and commission electronics R&D on their behalf. ERL does not have the objective of making a profit. The R&D that ERL commissions is funded from contributions made by the businesses. Those businesses would have been eligible for the tax credit if they had commissioned the R&D on their own behalf. The results of the R&D activities are made available to the businesses.
ERL meets the requirements to be an industry research co-operative and can claim tax credits for the eligible research it commissions. It is not relevant to the claim that the results of the R&D will eventually be disseminated to the wider electronics sector and may be used by businesses not part of ERL.
Note: Examples are simplified. You should check the detailed R&D information and/or consult your professional advisor
Can contributors claim the R&D tax credit?
Businesses that make payments to the IRC ("contributors") are not eligible for the credit in relation to those levies or contributions.
Eligibility of contributions
IRC expenditure is not eligible if it is sourced from funds contributed by businesses that are not in business in New Zealand, or would not be eligible for the tax credit if they carried out the R&D themselves and there was no minimum threshold.
New Zealand legislation
Income Tax Act 2007
- LH 1(1)(b)
- LH 3 (1)(a)
- LH 16
- Schedule 21, part B 16
Example - who can claim the R&D tax credit
Farmer A is in business in New Zealand and pays a levy to IRC X. The IRC uses part of the levy to fund eligible R&D.
If it is used on eligible expenditure, IRC X can claim the R&D tax credit for farmer A's levy but farmer A cannot claim the credit.
Note: Examples are simplified. You should check the detailed R&D information and/or consult your professional advisor.
Example - ineligible contributors
IRC Y receives payments from several businesses for eligible R&D activities. Business B is non-resident and does not have a fixed establishment in New Zealand, so it is not eligible in its own right.
IRC Y cannot claim the R&D tax credit for expenditure sourced from Business B's contributions.
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
- LH 1(1)(b)
- LH 3 (1)(a)
- LH 16
Find out more
- Types of eligible expenditure or depreciation loss
- Deductibility of expenditure
- Using listed research providers
- What expenditure is excluded from a claim?
Date published: 24 Mar 2009
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