SILICON CAPESoftware Development Incentives Discussion                                24 July 2012
Introduction: Catalyst Solutions   Catalyst is a boutique grants and incentives   consultancy offering a focused, efficien...
Grants and Incentives: Introduction                              S11D R&D Tax  Tax Incentives                             ...
R&D Tax Incentive   “To raise new questions, new possibilities, toregard old problems from a new angle requirescreative im...
Section 11D R&D Tax Incentive: Background   •   Enacted in 2007 - backdated to November 2006   •   Introduced to increase ...
Section 11D R&D Tax Incentive: Current Incentive   •   Section 11D(1) – Operational R&D Expenditure       • 150% tax deduc...
s11D: Current Incentive - Qualification Criteria    •   R&D must be conducted in South Africa:    •   In the production of...
s11D: Current Incentive - Software Development   •   All coding is copyrightable and therefore       qualifies   •   Despi...
s11D: Current Incentive - Relevant Exclusions   •   Any software developed for Management &       Internal Business Proces...
s11D: Current Incentive - Qualifying Costs   •   Any costs incurred directly in respect of R&D       activities.       For...
s11D: Current Incentive - Funding Issues   •   Funder of R&D can make the claim   •   Fundee can make claim if the Funder ...
s11D: Current Incentive – Administrative Issues   •   Statistical form submitted to DST   •   Can reopen tax returns for 3...
s11D: New Legislation – Why The Change   •   Increase utilization   •   Clarification of grey areas   •   Better control o...
s11D: New Legislation – Main Changes   •   Implementation date: 1 October 2012   •   Pre-approval process through DST   • ...
Support Program for Industrial Innovation     “Never before in history has innovation offered  promise of so much to so ma...
SPII: Basics   Support Program for Industrial Innovation (SPII)   Intended to promote technology development in SA   • Pro...
SPII: Basics   • Taxable non-repayable cash grants of 50 - 75%     of qualifying costs incurred in ‘pre-competitive’     d...
SPII: Qualification Criteria    • At the discretion of IDC (as opposed to s11D      which is law)    • Intended to lead to...
SPII: Qualification Criteria    What is the committee looking for?    1) Technological Innovation    2) Economic Merit – i...
SPII: Technological Innovation - Software   • Global technological advance       • Functionally unique and advanced       ...
SPII: Technological Innovation - Software   • Global technological advance (cont)       •   Innovation that is not availab...
SPII: Technological Innovation - Software   • Only costs from commencement date   •   Salary and Labour (timesheets)      ...
Technology Innovation Agency“I have not failed, I’ve just found 10,000 ways that                                         w...
TIA: Basics   Technology Innovation Agency (TIA)   • Established in 2008   • Promote development of technology – ICT is a ...
TIA: Basics   3 main programs for commercial entities:   • Idea Development Fund   • Industry Matching Fund   • Equity Fun...
TIA: What’s available?   • Funding from R100k - R50m (matching finance)   • Repayable as a soft loan or royalty (from     ...
TIA: Requirements   • Global Innovation   • Does not need to be radical or novel   • Must create a competitive advantage  ...
Dov Paluch                                         Michael Wingrin011 555 8339                                           0...
Upcoming SlideShare
Loading in …5
×

Grants and Tax Incentives for Software Research and Development

1,055 views

Published on

Published in: Technology, Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
1,055
On SlideShare
0
From Embeds
0
Number of Embeds
15
Actions
Shares
0
Downloads
19
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Grants and Tax Incentives for Software Research and Development

  1. 1. SILICON CAPESoftware Development Incentives Discussion 24 July 2012
  2. 2. Introduction: Catalyst Solutions Catalyst is a boutique grants and incentives consultancy offering a focused, efficient, value adding service offering • 13 years combined experience • assisted clients to get access to various grants and incentives in excess of R3bn • Part of a global organization that focuses on cost saving solutions
  3. 3. Grants and Incentives: Introduction S11D R&D Tax Tax Incentives Incentive R&D SPII Cash Incentives TIA
  4. 4. R&D Tax Incentive “To raise new questions, new possibilities, toregard old problems from a new angle requirescreative imagination and marks real advance in science.” Albert Einstein
  5. 5. Section 11D R&D Tax Incentive: Background • Enacted in 2007 - backdated to November 2006 • Introduced to increase the amount of R&D expenditure in SA • Target for GERD as percentage of GDP of 1% by 2008 • In first 2 years of the incentive, 80 submissions with approximately R900 million of R&D expenditure • New target has been set of 1.4% by 2015 • Hence the change in legislation
  6. 6. Section 11D R&D Tax Incentive: Current Incentive • Section 11D(1) – Operational R&D Expenditure • 150% tax deduction on expenditure directly related to R&D • Bottom line additional tax saving of 14% of qualifying R&D costs • Section 11D(2) – Capital R&D Expenditure • Accelerated depreciation of 50/30/20 • New and unused • Solely used for R&D
  7. 7. s11D: Current Incentive - Qualification Criteria • R&D must be conducted in South Africa: • In the production of income • For the purpose of: • Discovery of novel, practical and non obvious information; or • Devising, developing or creating • Inventions - patentable • Designs - registerable • Computer programs • Knowledge essential to the above
  8. 8. s11D: Current Incentive - Software Development • All coding is copyrightable and therefore qualifies • Despite the act not requiring it, SARS does still like to see an element of novelty
  9. 9. s11D: Current Incentive - Relevant Exclusions • Any software developed for Management & Internal Business Processes (MIBP) even if for sale to third parties. For example: • HR Packages • Accounting / ERP packages • Administrative packages • Time sheet software • Sales or marketing promotion. For example: • Website development • Internet Sales Systems
  10. 10. s11D: Current Incentive - Qualifying Costs • Any costs incurred directly in respect of R&D activities. For example: • Payroll costs – Developers • Sub-contractor costs • Overheads Excluded: • Rental • Finance Costs
  11. 11. s11D: Current Incentive - Funding Issues • Funder of R&D can make the claim • Fundee can make claim if the Funder is unable to. I.e.: • Financial Institutions • Foreign Funding • Government Grants = 2 x Grant is excluded
  12. 12. s11D: Current Incentive – Administrative Issues • Statistical form submitted to DST • Can reopen tax returns for 3 years from date of assessment
  13. 13. s11D: New Legislation – Why The Change • Increase utilization • Clarification of grey areas • Better control of incentive • Allow for better budgeting by companies
  14. 14. s11D: New Legislation – Main Changes • Implementation date: 1 October 2012 • Pre-approval process through DST • Improvements of previous software now eligible • Only companies can claim • No longer the ‘funder’ who can make the claim, but rather the company which ‘determines or alters the methodology of research’ • Govt. Grant = only 1 times grant is excluded • MIBP is allowed if for sale to third parties
  15. 15. Support Program for Industrial Innovation “Never before in history has innovation offered promise of so much to so many in so short a time.” Bill Gates
  16. 16. SPII: Basics Support Program for Industrial Innovation (SPII) Intended to promote technology development in SA • Product Process Development (PPD) Scheme • Matching Scheme • Partnership Scheme Applicable scheme is determined by the size of the company and the funding required
  17. 17. SPII: Basics • Taxable non-repayable cash grants of 50 - 75% of qualifying costs incurred in ‘pre-competitive’ development activity • Maximum grant = R5m • Funding is provided on a per-project basis (only 1 project at a time) • 2 – 3 months approval time
  18. 18. SPII: Qualification Criteria • At the discretion of IDC (as opposed to s11D which is law) • Intended to lead to commercialization of the developed product • Major portion of the project must take place in SA • IP must remain in SA registered co. for 3 years post development • Cannot be developed for a single client • Project must not be more than 50% complete
  19. 19. SPII: Qualification Criteria What is the committee looking for? 1) Technological Innovation 2) Economic Merit – is the solution commercially viable 3) Team capabilities – to perform the project 4) Financial Ability – to complete the project & raise the rest of the finance
  20. 20. SPII: Technological Innovation - Software • Global technological advance • Functionally unique and advanced • More efficient / lower cost / easier to use / faster • Innovation should be the result of technical development • New and unique product - attributes that have never been seen before • Enhancements – new features added so the entire product is seen as innovative
  21. 21. SPII: Technological Innovation - Software • Global technological advance (cont) • Innovation that is not available in other products on the market • Integration may be innovative – if components have never been combined before and if it results in significant functionality improvements not currently available.
  22. 22. SPII: Technological Innovation - Software • Only costs from commencement date • Salary and Labour (timesheets) • personnel directly involved • Management costs – directly involved (technically) • Project Management • Material • Sub-contractors
  23. 23. Technology Innovation Agency“I have not failed, I’ve just found 10,000 ways that wont work.” Thomas A Edison
  24. 24. TIA: Basics Technology Innovation Agency (TIA) • Established in 2008 • Promote development of technology – ICT is a focus sector • From proof of concept to early commercialization • Looking for ‘high social impact’ projects
  25. 25. TIA: Basics 3 main programs for commercial entities: • Idea Development Fund • Industry Matching Fund • Equity Fund Each deal is unique and is structured on an individual basis
  26. 26. TIA: What’s available? • Funding from R100k - R50m (matching finance) • Repayable as a soft loan or royalty (from revenues) • Each deal is unique • IRR required by TIA is dependent on social impact • No collateral required • Access to TIA advisors incl. – Patenting / Certification
  27. 27. TIA: Requirements • Global Innovation • Does not need to be radical or novel • Must create a competitive advantage • Must be a market need for the invention • Majority local shareholding • IP to remain in SA
  28. 28. Dov Paluch Michael Wingrin011 555 8339 011 555 8434082 773 7947 072 297 3867dovp@catalystsolutions.co.za michaelw@catalystsolutions.co.za www.catalystsolutions.co.za

×