Tax Exemption for Scientific or Industrial Research Organisations

One of the roles undertaken by the Royal Society, under New Zealand’s Income Tax Act of 2007, is to advise on status for organisations wishing to apply for tax exemption. Section CW49 of the Act states, in part, that exemption may be granted for:

1. An amount of income derived by a society or association established mainly to promote or encourage scientific or industrial research is exempt income if—
   1. the society or association is approved by the Royal Society of New Zealand; and
   2. none of its funds is used or available to be used for the private pecuniary profit of a member, proprietor, shareholder, or associate of any of them.

Exclusion

1. This section does not apply to a Crown Research Institute.

Defined in this Act: amount, associated person, Crown Research Institute, exempt income, income

Cf 2004 No 35s, CW41

Applications in writing should be addressed to: Chief Executive Officer, The Royal Society of New Zealand, P O Box 598, Wellington and contain documentation which demonstrates how the criteria have been met. Each application must be accompanied by a non-refundable fee of $450, including GST.

Tax Exemption Under Section CW 49, Income Tax Act 2007

Guidelines for Applicants

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GUIDELINES FOR APPLICANTS

1. Criteria for eligibility:
   1. Applicant must be an organisation, not an individual, but need not be incorporated.
   2. The organisation must be established substantially or primarily to promote or encourage scientific or industrial research.
   3. It must be demonstrated to the satisfaction of The Royal Society of New Zealand that such research falls within the definition set out in the attached definition.
   4. All organisations must have either a constitution, charter, trust deed, rules, or memorandum and articles of association which must include clauses to the effect that
      1. No part of any income or other funds of the organisation may be used or be available to be used for the private pecuniary profit of any proprietor, member or shareholder.
      2. In the event of the winding up of the organisation, any surplus funds are to be transferred to a similarly tax exempt organisation having similar aims and objects.
      3. No alteration to the rules is permitted which would have the effect of:
         1. amending the primary object of the organisation which enabled it to qualify for tax exempt status (1.2), or
         2. amending or deleting the clauses relating to 1.4.1 and 1.4.2 above, or
         3. amending this provision in the rules relating to the amendment of rules (i.e. the entrenched provisions may not be amended).
2. Procedure:

   Applications in writing should be addressed in the first instance to:

   Chief Executive Officer
   The Royal Society of New Zealand
   P O Box 598
   Wellington

   and contain documentation which demonstrates how the criteria in 1. above have been met. Each application shall be accompanied by a non-refundable fee of $450, including GST.

3. Assistance:

   The Royal Society will be pleased to assist applicants who may need additional information to enable them to complete their application.
   A definition of “Scientific or Industrial Research” has been prepared by the Royal Society to assist in considering applications -

   1. Scientific or Industrial Research comprises creative work undertaken on a systematic basis in order to increase knowledge, including that of mankind, culture and society and the use of knowledge to devise new applications.
   2. It is characterised by originality; it should have investigation as a primary objective, the outcome of which is new knowledge, with or without a specific practical application or it may involve new or improved materials, products, devices, processes, methods or services.
   3. The research ends when the work is no longer primarily investigative.
   4. Research can be distinguished from experimental development if the four elements of –
      • creativity
      • novelty or innovation
      • the use of scientific methods
      • the generation of new knowledge
        are given and are capable of being defended.
   5. Research excludes –
      • Engineering and technical services
      • Scientific and technical information services
      • General purpose or routine data collection
      • Operations research and mathematical or statistical analysis
      • Routine quality control and routine testing
      • Feasibility studies (except into research and development projects)
      • Specialised routine medical care
      • The commercial, legal and administration aspects of patenting, copywriting or
      • licensing activities
      • Routine computer programming, systems work or software maintenance

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