Section 11D allows South African companies undertaking qualifying research and development to claim a 150% tax deduction on eligible expenditure. To access the incentive, your R&D needs to meet specific scientific or technological criteria and receive approval before the benefit can be included in your company’s tax return.
For companies investing meaningfully in R&D, the incentive can provide a substantial tax benefit and reduce the effective cost of that work.
This Guide explains what qualifies, how the scientific or technological uncertainty test works, what the pre-approval process involves, which costs can be claimed and what records should be kept. It also looks at how best to manage the process from identifying qualifying R&D through to claiming the benefit.
It is designed for finance, tax, technical and innovation teams that want a clear view of how Section 11D works and what is required to build a well-supported submission.
Your project must involve systematic investigative or experimental work with an uncertain outcome and meet the Section 11D definition of R&D.
Your R&D project must be submitted for approval before the Section 11D deduction can be claimed.
Once approved, qualifying operational R&D expenditure can attract the 150% deduction through your company’s tax return.
The process begins with identifying whether your project genuinely qualifies as R&D. Once a qualifying project has been identified, an application is prepared, including information about the project, the intended R&D activities and the scientific or technological basis on which the work qualifies.
Following approval, your company can claim qualifying expenditure through its tax return. The financial claim needs to reflect the approved R&D activities, while your project records provide the evidence needed to support ongoing reporting and any later SARS review.
In practice, a Section 11D claim brings together two closely connected elements: the technical case that demonstrates why the R&D qualifies, and the financial claim that translates the approved activities into the value being claimed. These need to be developed in parallel so that the expenditure is clearly supported by the underlying R&D.
To qualify for Section 11D, your research or development project must meet the statutory definition. It must involve systematic investigative or experimental activities where the outcome is uncertain. The work must also fall within one of the qualifying categories set out in the legislation, such as discovering new scientific or technological knowledge, developing or significantly improving a qualifying product or process, or conducting an eligible clinical trial.
The incentive can apply across a wide range of sectors. Pharmaceutical development is an obvious example, but qualifying R&D can also arise in manufacturing and engineering, software, mining, agriculture, food production and other industries where a team is carrying out structured investigative or experimental work to achieve an outcome that is not readily available from existing scientific or technological knowledge.
Not every innovative or technically demanding project qualifies. Routine work, standard development and the straightforward application of existing knowledge generally fall outside the incentive where the outcome or method is already known.
Read more: What qualifies for the Section 11D R&D tax incentive in South Africa?
Scientific or technological uncertainty exists where a competent professional in the relevant field cannot determine in advance whether a particular outcome is achievable, or how it can be achieved, using the existing body of scientific or technological knowledge.
A project can be technically demanding, expensive or time-consuming without involving qualifying R&D if the knowledge or methods needed to achieve the outcome are already established. The distinction is whether the work involves genuine uncertainty that requires further investigative or experimental activity to resolve.
Scientific and technological uncertainty can take different forms. Scientific uncertainty can relate to whether something is possible or how it will behave. Technological uncertainty can relate to whether an established scientific or technological principle can be applied successfully to achieve the intended result.
The key question is whether a competent professional could determine the outcome or method using existing knowledge, or whether further investigative or experimental work was needed to establish it.
The fact that a project is difficult, expensive or technically complex does not make it qualifying R&D. The uncertainty must be something that a competent professional could not resolve using existing knowledge without carrying out further investigative or experimental work.
For a deeper explanation of how this test applies in practice, read What Is Scientific Or Technological Uncertainty Under Section 11D?
Before your company can claim the Section 11D deduction, the R&D project needs to be submitted to the Department of Science, Technology and Innovation (DSTI) for approval. The DSTI assesses whether the proposed activities meet the scientific or technological requirements of Section 11D.
The application needs to present the project clearly enough for the DSTI to assess why the work qualifies. A key part of this is the technical narrative, which explains the scientific or technological basis of the R&D and provides the information needed to support the application.
Assess your projects against the Section 11D requirements to determine which activities should form part of the application.
Develop the application and supporting technical motivation for the qualifying R&D activities.
Submit the application and supporting information through the R&D Tax Incentive Online System for assessment.
The DSTI may request further information or clarification as the application is assessed.
If approved, your company receives formal confirmation of the qualifying project and approved period.
Qualifying expenditure incurred up to six months before the DSTI application date can still be included in the claim, provided the project is subsequently approved. Waiting too long to apply can therefore mean earlier R&D expenditure falls outside the allowable period.
DSTI approval confirms that the project meets the scientific or technological requirements of Section 11D. It does not automatically confirm the financial claim. SARS retains responsibility for the tax treatment of the expenditure and may review whether the costs claimed were correctly calculated, allocated and supported.
Read more:
How the pre-approval process works for Section 11D claims
Once your R&D project has been approved, the financial claim determines which expenditure can be included under Section 11D.
The deduction applies to qualifying operational R&D expenditure that is directly linked to the approved activities. SARS requires the expenditure to be incurred directly and solely in carrying on the approved R&D, in the production of income and in the course of trade.
In practice, this means separating the wider cost of the project from the expenditure that relates specifically to the qualifying R&D. Where people, resources or costs support both qualifying and non-qualifying activity, appropriate allocation and apportionment may be required.
The benefit is realised through a reduction in taxable income, not as a cash payout. Section 11D allows qualifying operational R&D expenditure to be deducted at 150% for tax purposes. Where the normal 100% deduction has already been recognised, the additional 50% is claimed separately in the company tax return.
At the current 27% corporate income tax rate, that additional 50% deduction can translate into an effective tax saving of 13.5% of qualifying expenditure. For example, R1 million of qualifying R&D expenditure creates an additional R500,000 deduction, which can reduce tax payable by up to R135,000.
Qualifying expenditure incurred on the approved R&D.
Taking the total Section 11D deduction to R1,500,000.
Based on a 27% corporate income tax rate.
For a more detailed breakdown of eligible expenditure, read
Section 11D Qualifying Expenditure: Which R&D Costs Can You Claim?
Good record-keeping creates the link between the R&D that was approved, the work your team actually carried out and the expenditure ultimately included in your claim.
Rather than trying to reconstruct the project later, the aim should be to capture enough information as the R&D progresses to show what was investigated, how the work developed and what resources were used.
You will generally need both technical and financial records.
Capturing this information while the work is happening usually produces a much clearer record than trying to reconstruct months of R&D at year-end. It also gives your finance team a better basis for linking expenditure to the approved activities when the claim is calculated.
Your records should make it possible to trace the claim from the approved R&D activities, to the work performed, to the people and resources involved, and ultimately to the expenditure claimed.
Our full article on Project Record-Keeping for Section 11D R&D Tax Claims looks at the technical and financial records worth maintaining throughout the project.
A Section 11D claim touches several areas of the business and needs scientific or technological, legislative and financial input to come together properly.
Your accountant may be well placed to support the accounting, tax and financial aspects, but those are only part of the process. The R&D still needs to be assessed against the qualifying criteria, discussed in detail with the technical team and translated into a clear technical motivation. The person managing the claim also needs a strong understanding of the Section 11D legislation, including what qualifies, what is excluded and how the approval and reporting requirements apply.
Qualifying expenditure also needs to be identified correctly, allocated or apportioned where necessary and linked back to the approved activities.
Then there is the operational burden. Information often sits across engineering, R&D, finance, tax and management teams. Someone needs to coordinate those inputs, maintain continuity as projects evolve, keep records aligned and manage the process without allowing the claim to consume disproportionate time from the people whose main job is running the R&D or the business.
To recognise genuine uncertainty, interrogate specialised work and distinguish qualifying R&D from routine development.
To understand how the legislation, qualifying criteria, exclusions, pre-approval process and ongoing obligations apply to your projects.
To translate complex R&D into a clear, precise motivation without losing the scientific or technological substance of the work.
To identify eligible expenditure, apply appropriate allocation and apportionment, and maintain a clear connection to the approved R&D.
To bring the technical, finance, tax and management pieces together while keeping the demands on your internal teams controlled.
Section 11D claims require several different areas of expertise to come together, which is why specialist support can add value at every stage of the process. A specialist adviser can help identify everything legitimately eligible, translate the R&D into a strong technical case, build the financial claim around the approved activities and keep your team’s involvement focused and purposeful.
Read more:
Managing Your R&D Tax Claim In-House? Here is What to Consider
Catalyst Solutions brings the scientific, financial and legislative elements of a Section 11D claim together in one coordinated process.
Our engineers and scientists work directly with your technical teams to understand the R&D, identify qualifying activity and prepare the technical motivations. Our finance and tax specialists build the financial claim around the approved activities so that qualifying expenditure is identified, allocated and supported appropriately.
This multidisciplinary approach keeps the technical case, financial claim and legislative requirements aligned throughout the process.
Engineers and scientists work directly on your claim, participate in the technical discussions and prepare the technical motivations.
Everything legitimately eligible is identified and properly supported, without pursuing unsupported value that creates unnecessary risk.
Catalyst Solutions carries the operational weight of the process while keeping your team’s input focused on the areas where their knowledge is needed.
Choose the option that best reflects where you are today.
Tell us about the R&D your company is undertaking and we can help you understand whether the work could qualify and what the next steps would involve.
Discuss your current R&D activities and claim approach with our team, including where there may be opportunities to strengthen or maximise your claim.
Yes, but there is a limit to how far back qualifying expenditure can extend. Expenditure incurred up to six months before the application submission date can generally fall within the claim, provided the project is subsequently approved and the relevant requirements are met.
It can. What matters is whether the software development meets the Section 11D definition of R&D, including genuine scientific or technological uncertainty and systematic investigative or experimental work. Routine software development or the straightforward application of established methods would generally not qualify.
No. Only qualifying expenditure linked to the approved R&D activities can be included. Costs may need to be allocated or apportioned where only part of the expenditure relates to the qualifying work.
No. DSTI approval confirms that the project qualifies from a scientific or technological perspective. SARS may still review whether the expenditure claimed has been calculated, allocated and supported correctly.
An accountant may be well placed to support the tax and financial aspects of the claim, but Section 11D also involves scientific or technological understanding, knowledge of the legislation, technical writing and coordination with the teams carrying out the R&D. Whether an accountant can manage the entire process therefore depends on the wider capability available.
With Catalyst Solutions, preparing the initial submission typically takes around four weeks, depending on the number and complexity of the R&D projects being assessed and the availability of the required information.
Once submitted, the DSTI review and approval process takes approximately three months. Following approval, Catalyst Solutions calculates the qualifying benefit and prepares the supporting documentation so that the enhanced deduction can be included in your provisional or final corporate tax return.
Once the project is approved, qualifying expenditure relating to the approved R&D can be considered for the Section 11D deduction. Your company also needs to maintain appropriate records, meet the relevant reporting requirements and be able to support the expenditure if SARS reviews the claim.
Yes. An approved R&D project can extend across multiple tax years, with qualifying expenditure considered as it is incurred during the relevant approved period and subject to the Section 11D requirements.
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