The Brewery industry employs brewers, engineers, technicians and scientists who often spend a significant portion of their time developing new styles and flavours, improving existing processes and brewing techniques. These companies invest in R&D to remain competitive in the market, and keep up with the latest trends, and also to ensure they are compliant to new regulations. In responding to the unique requirements of their clients, the Brewery industry is engaging in some form of R&D to find new and improved solutions to meet the needs of their consumers.
Every time you experiment with a new formula, play around with eclectic ingredients, or experiment with different strains of yeast or types of hops, you’re doing R&D. Every time you adjust your production or bottling process to make it cheaper, faster or better, you’re doing R&D, and the costs of this labour, ingredients and other supplies can all be taken into consideration for the credit.
Furthermore, the ongoing improvement and availability of new ingredients, brewing techniques, products and technologies means that breweries must innovate to stay up to date – and this is basis of why they spend on R&D. Therefore, the Brewery industry is involved in R&D every day, and it is important to not only recognise this, but to take advantage of the SA R&D Tax Incentive.
“Death and taxes may be inevitable, but they shouldn’t be related.”
J.C. Watts
What is the R&D tax incentive?
This incentive is part of a package of measures that the government of South Africa has introduced to support innovation, industrial development and competitiveness. The objective is to help companies build capabilities to create new products, processes, devices and techniques, or significantly improve existing ones. Ultimately, the R&D Tax Incentive hopes to encourage businesses to undertake and invest in R&D in South Africa.
Benefits of the R&D Tax Incentive:
- A 150 % Super Tax Deduction on research and development operational expenses
- Accelerated Depreciation at 50/30/20 percent over 3 years for R&D plant and machinery
- Immediate write-off on pilot plant or pilot mould in the year of implementation
As regards the 150% Super Deduction, as an example, if a business spends R10m on R&D, it can save R1.4m in taxes. This saving on income tax can be used to invest in more R&D, invest in other areas of the business or quite simply generate more profit. Any smart business would recognise the significance of these benefits.
Examples of brewery innovations eligible for SA R&D tax incentive include the following:
- Developing new or improved hopping techniques
- Developing new or improved hop varieties
- Developing new or improved yeast strains
- Developing new or improved fermentation processes
- Developing new or improved bottling or canning processes
- Developing new or improved bottle, bottle crown or can designs
“What the government gives it must first take away.”
John S. Coleman
These are just a few examples of research and development activities in the Brewery industry.
The R&D Tax Incentive means paying less corporate tax to SARS.
If your company operates in the Brewery industry, there is good reason for you to find out whether your projects and activities qualify for the R&D Tax Incentive. For a free assessment, speak with Vantage Advisors to help you understand whether you can qualify for the tax deductions.
email: vantage@taxincentive.co.za