The R&D tax incentive is available to companies of all sizes in any sector of the economy. To be eligible, a company must be an incorporated entity and recognised as a company under the Income Tax Act. Individuals, non-profit organisation and trusts are not eligible.

The company must be engaged in eligible R&D activities within the Republic and its R&D activities must be approved by the Minister of Science and Technology. The approval is granted on the basis of the recommendation by the Committee, which evaluates each application according to the definition of R&D in terms of section 11D of the ITA.

Where appropriate, guidance relating to R&D in specific industrial activities is provided. Selection of the areas addressed in this manner is influenced by a need for providing clarity at this level. While this is found useful, companies are advised to carefully read the Act.

General requirements are that the R&D expenditure claimed by a company should be incurred (1) directly and solely for R&D undertaken in South Africa, and (2) in the production of income and the carrying on of any trade, and (3) incurred on or after the date on which the DST received the application from the company. Prototypes and pilot plants created solely for purposes of the R&D are also eligible.

Where a company funds R&D that is undertaken by a third party, the company that can alter or control the methodology of the R&D is eligible to claim the deduction. In these situations, only one of the parties may claim the deduction, with the exception of unincorporated joint ventures. Companies that do not have internal capability to undertake R&D can use this provision to contract out their R&D work, to science councils, universities or another company, whilst still benefiting from the incentive.