The South African National Treasury is seeking input on a discussion document released December 15 reviewing the design, implementation, and impact of its research and development (R&D) tax incentive program. The review is looking into whether the country’s R&D tax regime, which is slated to sunset at the end of September 2022, should be extended and, if so, in what form.
South Africa’s R&D tax incentive, introduced in 2006, aims to encourage private sector R&D investment in the country. Companies getting pre-approval, under a process introduced in 2012, may deduct 150% of their qualifying R&D expenditures. In deciding whether to continue the program, the government wants to know more about how valuable the program is and whether it is achieving the desired aim.
The reconsideration of the country’s R&D tax policy forms part of a larger government review of the structure of South Africa’s corporate tax regime. The government seeks to lower the corporate tax rate while broadening the base – including by reevaluating existing tax incentives.
Policy issues of the R&D tax incentive under review include the rate of the subsidy, which companies are eligible, whether to apply a threshold-based or incremental system, whether a ceiling should be imposed, and sector biases. The government is also looking into administrative issues related to the pre-approval and review processes.
Public input is invited through an online survey with several questions about what aspects of the R&D tax regime’s current design are and are not working. Comments will be accepted until January 25, 2022.
The government plans to make further announcements on the R&D tax incentive in the 2022 budget.
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