South Africa: Proposed amendments to section 11D R&D tax incentive

The National Treasury released proposed amendments to section 11D.

The National Treasury released proposed amendments to section 11D.

Following the Ministry of Finance's announcement (February 2023) to extend the section 11D research and development (R&D) incentive for another 10 years, the National Treasury on 31 July 2023, released proposed amendments to section 11D.

The section 11D R&D tax incentive provides for a 150% deduction for qualifying expenditure on eligible scientific or technological R&D undertaken by companies in South Africa. This requires the submission and approval of an application to the Department of Science and Innovation (DSI).

The proposed significant amendments to section 11D include:

  • Introduction of a grace period when taxpayers will be allowed to claim qualifying R&D expenditure incurred up to six months before an application is submitted to the DSI
  • Extension of the sunset clause up to 31 December 2033
  • Insertion of “scientific or technological” wording before “research and development” throughout the section to emphasise that the intention of the incentive has always been to encourage R&D activities aiming to solve scientific and technological uncertainties
  • Simplification of the R&D definition to apply only to activities aimed at resolving scientific or technological uncertainties that cannot be solved by professionals in the particular field using existing tools and methodologies
  • Deletion of the existing requirements for the invention, design, computer program or knowledge to be created or developed under specific Acts (Patent Act, Design Act, Copyright Act, etc.) (i.e., the so-called “end result focus”), as it is not practical to expect taxpayers to have knowledge of how the envisaged R&D will play out at the time of submitting an application
  • Removal of the prohibition to claim R&D related to internal business processes
  • Introduction of a fine or imprisonment for officials involved in the administration of the incentive who contravene the confidentiality obligations contained in section 11D

The above changes are proposed to be effective for applications submitted and expenditure incurred on or after 1 January 2024.

Read an August 2023 report [PDF 192 KB] prepared by the KPMG member firm in South Africa


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