South African Tax Incentives
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R & D
Revenue laws amendment Bill 2007 (in PDF Format)
SARS has passed legislation to offer a 150% deduction for R&D costs and accelerated depreciation on R & D capital expenditure. The aim of the Act is to stimulate original research in South Africa.
This section of the Act was Ammended in June 2007.
This article appeared in the Cape Times, 7th February 2007. It was written by Timothy Jones of Bowman Gilfillan and Betsie Strydom.
New rules allow 150% deduction for costs of R&D
This follows on a number of statements by Government to commit to Open Source implementation.
The Act (Section 11D) makes specific reference to Computer Software. The government is therefore particularly interested in stimulating the development of Software that is not an intrinsic part of the business process, that is software that has a replicating commercial value.
Currently, according to the Human Sciences Research Council, Research Development is approximately R 6 Billion. In a Trillion Rand Economy this is well below the 1% threshold that successful economies commit to future development. South Africa is a country that has a healthy fiscal surplus and a the same time has a negative balance of payments. The R and D tax incentives create a way for Government to return funds to the economy while avoiding the overheating that would come from increased consumption if it was returned directly to the tax paying individuals.
At first it seems really strange that a government would want to "give away" it money in this sense. However the world is a competitive place and countries like The US, Canada, UK , Netherlands, France Spain, Australia all have these types of incentives. In the UK is is even possible to claim cash instead of tax credits. This is a competitive world we live in where Intellectual Property is the key to increased wealth. South Africa has been heamouraging IP over the last few years. These incentives offer the chance to build our own intellectual wealth. Open Source, which is free for everyone to use, is the very best IP that can be made.
SA slides in global IT rankings. SA has lost 10 places in the Networked Readiness Index (NRI) of the World Economic Forum's Global IT Report 2006-2007.more..
Tax Calculation
- You must be a registered South African Tax payer to qualify for the benefit.
- The higher your marginal tax rate the greater the incentive is to invest in R and D
You can view the calculations at the above links, but to be able to edit and collaborate, you will need to sign up a Google Accounts and be invited to participate.
To get this invitation
contact mailto:philip@pinksoft.co.za
The Open Source Development Fund
The aim of this legislation is to encourage Research and Development of an original and nonobvious nature. We all agree that Open Source is good for the country and has major benefits. The aim of this website is to set up an Open Source fund managed by Philip Copeman, one of the most experienced Open Source developers in South Africa. This would ensure the quality control needed to ensure that the funds were in fact used for R & D and that they are channeled into the correct areas.
Given that this fits in with the view of SARS, then there are projects immediately available for between R20 to R50 Million.
