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What is the RDTI and is it right for me?

The RDTI is designed to encourage a wide range of New Zealand businesses to undertake more R&D. Businesses spending between $50,000 and $120 million a year on R&D may be eligible to claim, and businesses that spend under $50,000 per annum may still claim if they work with an approved R&D provider (ARP). There are also provisions for businesses wishing to spend more.

The RDTI offers most New Zealand-based businesses a 15% tax credit on money spent on R&D in New Zealand. You can use the credit to reduce your income tax bill. It is generally available to businesses who spend more than $50,000 on eligible R&D in a given year, but if you spend less than $50,000 you might be eligible if you use an approved research provider (ARP) for your R&D. You can be eligible whether your business is in profit or loss. Special rules apply to allow you to include some overseas R&D in your claim if you meet certain criteria.

The main features

A credit rate of
expenditure cap
A minimum R&D
expenditure of
per year
(or less with an approved research provider)

If your business is in a tax loss position or you do not have enough income tax to pay to use up all of your R&D tax credits, you may now be eligible for refundable R&D tax credits. This will help smaller businesses with cash-flow challenges. If you’re eligible for refundability, you can receive R&D tax credit refunds up to a cap based on labour-related taxes. Read our How-To Guide to learn more about RDTI refundability.

Is my business eligible?

If your business is using a systematic approach with an aim to both resolve scientific or technological uncertainty and create new knowledge, or new or improved processes, services, or goods, the RDTI may be right for you.

You’re eligible to apply for the RDTI if you:

  • perform a core R&D activity in New Zealand yourself or through an R&D contractor in New Zealand, and
  • conduct business through a fixed establishment in New Zealand.
What is a fixed establishment?
A fixed establishment is a fixed place of business in which you carry on substantial business, like a shop, factory or workshop. You are likely to have a fixed establishment in New Zealand if you're doing core R&D yourself in New Zealand (rather than through a contractor).

The RDTI is intended to reward businesses investing in R&D, so it excludes R&D contractors whose business is doing R&D for others. Find more information on page 27 of Inland Revenue's detailed RDTI guide.

To be eligible to claim:

  • you must own the results of your R&D, or
  • another company in your corporate group must own the results of the R&D and must also be tax resident of New Zealand or a jurisdiction with which New Zealand has a double tax agreement, or
  • your joint venture or partnership (if you are in one) must own the results of the R&D.

Partnerships, look-through companies and joint ventures are eligible for the incentive if they meet certain conditions. Refer to page 29 of the detailed RDTI guide for more information.

Ineligible entities

You cannot claim the RDTI if you:

  • 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 performing the R&D activity on behalf of another person who carries on a business through a fixed establishment in New Zealand, and/or;
  • are a member of a joint venture, a partner in a partnership, or an owner of a look-through company, and not a New Zealand tax resident for the whole tax year.

Download the full introductory guide

Guidelines for digital technology sector

Specific guidelines have been developed for businesses in the digital technology sector. These guidelines provide clarity on what digital technology related R&D is included in the RDTI. The guidelines are published on the Inland Revenue website and can be viewed/downloaded here.

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