The 150% deduction, the mandatory DSI pre-approval, what qualifies as R&D, and the extension to 31 December 2033 — set out plainly.

dgm is an independent integration partner for osFoundry — it is not affiliated with osFoundry’s maker (OS LLC) and has not yet completed an integration project for any client.

How does the section 11D R&D tax incentive actually work? In short: a 150% deduction on approved R&D expenditure, with mandatory pre-approval from the Department of Science and Innovation, available to qualifying expenditure up to 31 December 2033.

The mechanics

  • The deduction is 150% of qualifying operational R&D expenditure — the normal 100% plus a 50% uplift — claimed by the company against its income tax.
  • Pre-approval by the DSI is mandatory: SARS allows the deduction only where the R&D was pre-approved by the Minister and the taxpayer holds an approval letter.
  • The incentive is jointly administered — the DSI handles applications and approvals, while SARS audits the claimed expenditure.
  • The incentive applies to qualifying expenditure incurred on or after 1 January 2024 up to and including 31 December 2033.

Who qualifies

  • The applicant must be a company that carries on a trade, conducts or funds the R&D itself, incurs the expenditure directly and intends to use the outcomes to generate income.
  • The benefit accrues to the taxpayer doing the R&D; there is no accredited-vendor route.
  • Always confirm the current qualifying-expenditure rules and application process with the DSI and SARS before relying on them.

What it means for AI

  • Developing a novel AI capability may qualify as R&D — buying an existing subscription does not.
  • osFoundry can be used inside a qualifying R&D activity, but the deduction is for the research, not the software.

The honest framing

Public support in South Africa funds the company’s own research, development or innovation, or gives it a tax break — it does not buy an off-the-shelf AI subscription. The section 11D R&D tax incentive offers a 150% deduction on approved R&D, requires pre-approval by the Department of Science and Innovation and has been extended to 31 December 2033; the Technology Innovation Agency (TIA) and the Small Enterprise Development and Finance Agency (SEDFA, formed in 2024 from SEDA and SEFA) fund innovation and small enterprises; and DTIC sector programmes such as the Global Business Services (GBS) incentive and the automotive APDP support specific industries. Separately, Broad-Based Black Economic Empowerment (B-BBEE) is a procurement and empowerment scorecard, not a grant: a supplier’s B-BBEE level affects how many procurement points its customers earn, so it shapes who buyers prefer rather than paying for software. dgm is not a registered or accredited provider of any of these programmes; it can advise a beneficiary or act as a subcontractor.

Where dgm comes in

dgm is an independent integration partner that helps organisations in South Africa adopt the osFoundry platform — from identifying the first practical use case, to setting it up, to connecting AI to the systems you already run. dgm can help identify which parts of your activity might qualify — without committing that any incentive will be granted. dgm operates separately from osFoundry’s maker (OS LLC) and has not yet completed an integration project for any client, so everything above is a proposed service rather than a delivered outcome. If you would like to weigh up a practical first step, dgm would be glad to think it through with you. Arrange an introductory call with dgm.

This article is general information and is not legal, financial or tax advice. Incentives, tax rates and regulations change; always confirm the current position with an official source (SARS, the Department of Science and Innovation, the dtic, the Information Regulator, the FSCA or the relevant authority) or a qualified adviser before you act.