South Africa offers any company undertaking eligible R&D activity an additional 50% deduction, i.e. a total 150% ‘super deduction’ on qualifying expenses. Pre-approval is required and turnaround times for processing pre-approval applications can be lengthy, estimated at between 6-12 months.
As the process is a forward looking, pre-approval, process, companies are encouraged to have a high level understanding of the project’s ongoing activities, as well as potential challenges involved over a prospective 1-3 year period.
|South Africa all Companies
|50% additional tax deduction (150% Super deduction)|
||The South African 150% super deduction scheme requires pre-approval and allows qualifying companies to deduct R&D expenses from taxable income, generating a net tax benefit of 14%. The definition of R&D for tax purposes is slightly different and the R&D project must fit into one of the below definitions to be eligible for the R&D incentive:
Approvals are given to companies on a project by project basis and R&D activities must be carried out within South Africa.
|Eligible Claim Period
||All projects must be approved by the Department of Science and Technology (DST). Companies can claim from the date of submission of the pre-approval application and not just the date of approval, until the project’s completion.|
||The scheme was originally introduced in 2006, with modifications being made to the incentive in October 2012, introducing the pre-approval application process. In 2017 the DST introduced an online portal to facilitate online submissions.|
|Regulating Body Policies
|Issues to Consider
||Due to the scheme’s prospective nature, companies should ideally have a projected roadmap of each project’s development and evolution, with identified areas of risk and uncertainty, before applying for the incentive. This will improve the chances of obtaining pre-approval and help ensure continued eligibility of the evolving activities and associated costs to maximise the claim value.|