Page 469 - SAIT Compendium 2016 Volume2

IN 50 Income Tax acT: InTeRPReTaTIon noTes
6.6.1 The law — section 11D (8)
6.7 Recoupment of amounts allowed under section 11D (1)
6.7.1 The law — section 11D (9)
6.8 Recoupment of allowances allowed under section 11D (2)
6.8.1 The law — section 11D (10) PART 4: OTHER PROVISIONS
7. The law — sections 11D (11), (12), (13), (14). (15), (16), (17) and (18)
8. Reporting requirements
8.1 Reporting by the taxpayer to the Minister of Science and Technology
8.2 Reports from the Minister of Science and Technology to Parliament
8.3 Preservation of secrecy
8.4 Oath or solemn declaration
9. Offences and nes
9.1 Offences relating to submission requirements — section 11D (16)
9.2 Offences relating to breach of secrecy provisions — section 11D (17)
9.3 Failure to take prescribed oath or make solemn declaration — section 11D (18)
10. Record-keeping
11. Conclusion
Annexure A — Examples of activities directly eligible for R&D purposes Annexure B — Examples of activities excluded from eligibility for R&D purposes
Preamble
Legislative references in this Note to sections and subsections are to sections and subsections of the Act unless otherwise stated.
For the purposes of this Note—
• ‘R&D purpose’ refers to any one of the purposes listed in section 11D (1) (a) and (b); and
• ‘eligible asset’ refers to ‘any building or part thereof, machinery, plant, implement, utensil or article’.
This Note is divided into parts to deal with each deduction separately, as well as the other requirements of the section.
1. Status of this Interpretation Note
This Note is not a binding general ruling issued under section 76P of the Act. Should an advance tax ruling be required, visit the SARS website www.sars.gov.za for details of the application procedure.
2. Purpose
This Note provides guidance on the interpretation and application of section 11D, which provides deductions for scienti c or technological research and development (R&D).
3. Background
Section 11D was introduced in 2006 to encourage private-sector investment in scienti c or technological research and development. It replaces the old research and development regime under section 11B.
The scienti c or technological research and development program or tax-incentive scheme, as it is now called, is an indirect approach by government to increase national scienti c and technological research and development expenditure and complements government expenditure on scienti c or technological research and development activities.
In contrast to section 11B, the section has been simpli ed to ensure that South African enterprises of all sizes and in all sectors are encouraged to conduct scienti c or technological research and development locally which will lead to scienti c or technologically advanced products or processes.
Section 11D allows a deduction for expenditure actually incurred by a taxpayer directly for activities undertaken in the Republic for an R&D purpose.
The section came into effect on 2 November 2006. A deduction for R&D expenditure incurred before that date must be sought under section 11B. This Note re ects section 11D as amended by the Revenue Laws Amendment Act 60 of 2008.
Two types of deductions are allowable under section 11D. First, the 150% deduction of expenditure incurred for an R&D purpose under section 11D(1) and secondly, an accelerated depreciation deduction under section 11D (2) for capital expenditure incurred on any building or part thereof, machinery, plant, implement, utensil or article used for R&D purposes.
* Section 11D was inserted by section 13 (1) of the Revenue Laws Amendment Act 20 of 2006 deemed to have come into operation on 2 November 2006 and applicable in respect of any activities undertaken on or after that date, or any building or part thereof, machinery, plant, implements, utensils or articles brought into use for the rst time on or after that date. The effective date in section 13 (2) of Act No. 20 of 2006 was amended by section 99 (1) of the Taxation Laws Amendment Act 8 of 2007.
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IN 50