- By Dov Paluch | Director, Catalyst Solutions
The Section 11D pre-approval process is the gateway to a 150% tax deduction on qualifying R&D expenditure. Get it right and you secure a significant reduction in your company’s tax bill on R&D your business is already funding. Get it wrong, or go in underprepared, and you risk either a rejected application or an approval that may not cover the R&D that is actually being done. This article takes you through what the process involves, stage by stage, and where the real complexity sits.
The Department of Science, Technology and Innovation, the DSTI, is the government body responsible for overseeing whether a company’s R&D work qualifies under Section 11D. Before any expenditure can be claimed, the DSTI must review and approve the project. Pre-approval exists because the stakes are high on both sides. For businesses, a 150% deduction on qualifying expenditure is a significant tax benefit. For the government, that benefit needs to be justified. The DSTI exists to verify that the work genuinely qualifies before any claim is accepted.
That approval is not a rubber stamp. It is a technical adjudication by a committee of experts, and the first of two compliance layers (technical and financial) every claimant must satisfy.
The application is submitted through the DSTI’s online portal, but the portal is not where the process starts. By the time you log in to submit your application, three things should already be in place:
One of the most significant changes introduced by the 2024 amendments to Section 11D is the six-month grace period on qualifying expenditure. Before this change, a company could only claim expenditure incurred from the date the DSTI received the application. Any R&D work done before that date was simply not claimable, regardless of how clearly it qualified.
This grace period now allows a company to include qualifying expenditure incurred up to six months before the submission date, provided the project is subsequently approved. In practical terms, a business that begins qualifying work in January and submits its application in July can include expenditure stretching back to January. If you had to wait until October to submit, expenditure incurred in February through April will not be considered.
This is good news for businesses that are already doing qualifying work. The government has created a meaningful window to capture expenditure that would previously have been lost. But that window only works in your favour if you are deliberate about when you submit. By delaying your submission, you are quietly shrinking the amount you can claim, and once that expenditure falls outside the six-month window, it cannot be recovered.
Getting the timing right from the outset is one of the most important decisions you will make in the process.
Before you begin your application, you will need to have the following ready:
The technical narrative will be the core of your submission. It must describe your R&D project in enough detail that an independent technical expert, with no prior knowledge of your business or your industry, can assess whether the work meets the Section 11D qualifying test. That means explaining the specific scientific or technological uncertainty your team is working to resolve, how the project is being approached systematically, what is being tested, what the possible failure modes are, and what the work is expected to produce.
What it should not read as is a product description or a commercial justification. The adjudication committee is asking a narrow technical question, and a narrative that does not answer that question directly will not pass adjudication, regardless of how genuinely qualifying the underlying work is.
Getting the technical narrative right requires a level of precision that most finance teams and technical leads find difficult to achieve without guidance. Working with an experienced R&D tax advisor can make the process significantly more manageable.
Once your application is submitted, the DSTI adjudication committee reviews it against the Section 11D qualifying criteria. The committee includes three members from the DSTI, three from SARS, one from National Treasury, and utilises a panel of external technical experts appointed to assess the eligibility of the R&D project. Their assessment is independent. They are not evaluating the commercial potential of your product, the size of your business, or the ambition of your R&D programme. They are asking one question: does this work meet the statutory definition of qualifying research and development?
The most common reason applications struggle at this stage is not that the underlying work does not qualify. It is that the technical narrative did not make the case adequately. A committee of technical experts cannot approve work they cannot assess. If the narrative is vague, describes outcomes rather than investigative process, or mixes difficulty with uncertainty, the application will come back with questions or be declined.
Clients usually come to us after receiving questions from the DSTI they cannot answer, or a letter indicating the application will be rejected. In most of those cases, the work genuinely qualifies. What was missing was the information the committee needed to see: the specific technical framing that many businesses simply do not know to include the first time they go through this. In those situations, we take over the application, rewrite the narrative with the correct technical detail, and resubmit.
The adjudication process is meant to take three months from submission to decision. In practice, applications that move through the committee smoothly can still get held up waiting for the Minister to sign the approval letter. Following up with the DSTI to confirm they are actively looking at the application makes a big difference, and responding to any questions promptly, within the timeframe given, helps avoid unnecessary delays.
The committee may come back with requests for additional information or clarification. Responding to these promptly and thoroughly is important. Delays on your side extend the overall timeline, and a poorly considered response to a clarification request can raise further questions rather than resolve them.
Where the application is approved, the company receives a formal letter of approval from the Minister of Higher Education, Science, Technology and Innovation, specifying the qualifying project and the approved period.
Where an application is declined, the DSTI provides reasons. In some cases, the identified deficiencies can be addressed and the application resubmitted. In others, the work as described does not meet the qualifying test and a more fundamental reassessment is needed. Either way, a declined application is not necessarily the end of the road, but it is a setback that the right preparation could have avoided.
DSTI approval is a significant milestone, but it is not the finish line. Once a project is approved and expenditure is claimed in the company’s tax return, SARS retains independent audit rights over that expenditure. The two bodies are asking entirely different questions and satisfying one does not protect you from the other.
The DSTI is asking whether the technical work qualifies as research and development under Section 11D. SARS is asking whether the expenditure claimed in the tax return is correctly calculated, accurately allocated to qualifying activity, and properly supported by documentation. A company can receive DSTI approval and still face a SARS audit that questions whether staff costs were correctly apportioned between qualifying and non-qualifying activity, whether contractor costs were genuinely attributable to the approved project, or whether the figures in the tax return match the records held on file.
The discipline required to get through DSTI adjudication needs to carry all the way through to SARS audit readiness. A claim built carefully enough to satisfy the pre-approval process but no further is only half built.
The Section 11D pre-approval process is manageable, but it is not simple. The technical narrative, the timing decisions, the documentation discipline, and the dual compliance requirements of both DSTI and SARS all need to be considered together, from the moment a qualifying project is identified.
The companies that navigate this well do not do it alone. If you are considering a Section 11D claim for the first time, or want to understand whether a claim already in progress is being built to the right standard, speak to the Catalyst Solutions team. We work with businesses across South Africa and have supported clients through the full Section 11D process, from initial application through to SARS audit.
ABOUT THE AUTHOR
Dov Paluch is the Founder and Director of Catalyst Solutions and has spent over 15 years working with businesses across South Africa on R&D tax incentive claims. He has guided clients through the full Section 11D process, from initial qualification through to SARS audit.
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