You must be an eligible entity to claim R&D tax credit. Private sector businesses and levy bodies are generally eligible.
General eligibility criteria
You are likely to be an eligible entity if you:
- perform an eligible core R&D activity in New Zealand
- run a business through a fixed establishment in New Zealand
- own the results of your R&D activities or can use the results of your R&D activities at no extra cost
- meet the minimum expenditure threshold requirements, unless you are using an approved research provider
- file your income tax return no later than 1 year after the due date
- file your supplementary return no later than 30 days after the due date for the relevant income tax return.
If you do not own the results but another company in your corporate group does, you are an eligible entity if the other company is based in:
- New Zealand
- a country with whom New Zealand has a double tax agreement.
However, you cannot:
- receive the Callaghan Innovation Growth Grant
- be on the list of ineligible entities.
If you are doing the R&D on contract for someone else, you are unlikely to be eligible.
Joint ventures, partnerships and look-through companies
If you are in a partnership, joint venture or doing the R&D through a look-through company, the entity eligibility and R&D activity tests apply at the level of the partnership, joint venture or look-through company as a whole.
Parties performing R&D as part of an unincorporated joint venture may be eligible at the joint venture level.
If the joint venture is an eligible entity and meets the minimum expenditure threshold, then each member is eligible to claim the R&D tax credit.
Ineligible entities
You cannot claim the research and development tax incentive if you:
- receive or are directly or indirectly controlled by or associated with a person receiving a Callaghan Innovation Growth Grant for the same income year. A limited exception applies for businesses with a late balance date in the 2020/21 income year
- are a Crown Research Institute, district health board or tertiary education organisation, an associate of one of these organisations or are majority owned or effectively controlled by one of these organisations or their associates
- are a member of a joint venture, partnership or an owner of a look-through company and are not resident in New Zealand in the tax year.
Mike and Sarah are both tax residents of New Zealand and have equal interests in a partnership based in New Zealand.
During the year, Mike undertakes eligible core R&D activities for the partnership business. Sarah does not have any knowledge or skill to perform the R&D activities, but she will be marketing the results of those R&D activities the following year.
The partnership satisfies the eligible entity criteria with respect to R&D activities performed by Mike during the year. Both Mike and Sarah have met the criteria and will be eligible to claim the R&D tax credit relative to their share in the partnership.