In October 2012, new administrative arrangements were introduced to give companies more certainty about their claims for research and development (R&D) tax incentives, which are offered by the government in terms of section 11D of the Income Tax to encourage the private sector to undertake R&D in South Africa.
Companies automatically obtain a 100% deduction for R&D activities as part of their deduction for business expenditure. However, under the new arrangements, companies can get an additional 50% deduction if an R&D project is preapproved by the Minister of Science and Technology.
The overwhelming number of requests for preapproval is encouraging in that it shows that the private sector is more than willing to invest in R&D and introduce innovations in the country.
Between 1 October 2012 and 30 June 2013, 384 applications were received. Of this total, 177 applications received in October alone. We are now receiving an average of 25 applications every other month.
Regrettably, the unexpectedly large number of applications delayed the preapproval process, but I am pleased to announce that the first batch of applications has now been approved and the relevant companies will receive formal communication in this regard before the end of July 2013.
Special measures have been taken to ensure that the department issues final decisions on all the 384 applications by 15 December 2013. By March 2014, we expect to have cleared the current backlog and to be in a position to finalise applications within 90 days of receiving the application.
We hope that the above commitment provides clarity to companies who have applied or wish to apply for the additional 50% deduction. We intend to issue regular updates on the progress we are making on the DST website.
For further enquiries on the status of applications, please contact Dimakatso Mokone at 012 843 6560 or dimakatso.mokone@dst.gov.za.
