The South African government offers the R&D tax incentive under section 11D of the Income Tax Act (Act No. 58 of 1962) in order to promote private sector R&D investment in the country. R&D is required in order to boost innovation in the business sector, by improving the capability for developing new products and processes and improving existing ones. This is crucial for improving competitiveness and growth of the South African economy.
The incentive allows any company undertaking scientific and or technological R&D in the country to deduct 150% of its R&D spending when determinig the taxable income. The incentive is available to businesses of all sizes and in all sectors of the economy.
The Department of Science and Technology (DST) shares responsibilities for the delivery of the incentive with the South African Revenue Service (SARS) and the National Treasury. The incentive is part of a package of policy instruments to promote R&D and innovation in the country.
In South Africa the R&D Tax Incentive is a major form of government fiscal support for private-sector R&D. There is a range of direct funding programmes, such as the Support Programme for Industrial Innovation (SPII) and the Industrial Innovation Partnership Programme (IIP), and grants/loans and equity support provided through the Technology Innovation Agency, which target market-ready technology development and commercialisation. The Technology for Human Resources in Industry Programme (THRIP) fosters R&D collaboration between private-sector companies and universities and science councils.