The R&D relief allows for a deduction from the tax base of so-called qualified costs that have been incurred for R&D activities. This results in an additional deduction – once as part of the standard tax costs and a second time as part of the R&D relief.
What is the R&D relief based on?
A deduction under the R&D tax credit for qualified costs is allowed only on income derived from activities other than capital gains (i.e., operating income). This results in an additional deduction – once as part of the standard tax costs and a second time as part of the R&D relief.
The amount of the deduction is capped – it cannot exceed operating income in a given tax year.
What steps must be taken to benefit from the relief?
Analysis of R&D activities
In the first instance, it should be checked whether the taxpayer incurs any expenditure on research and development activities, as defined by law.
Eligible costs
If an R&D activity is identified in the company, the next step is to determine which costs incurred for this activity meet the definition of eligible costs.
Documentation
It is necessary to collect relevant documentation confirming the taxpayer’s entitlement to this tax preference when settling the relief. In addition, beneficiaries of the R&D relief are statutorily obliged to separate in their accounting records the costs of R&D activity.
R&D activities – definition?
Tax laws define it as a creative activity involving scientific research or development, undertaken in a systematic manner to increase the stock of knowledge and to use the stock of knowledge to create new applications. It includes several important components.
First, it is a creative, and therefore creative, activity that results in something new, original, a creative solution, concept or tool.
Second, it includes scientific research (the acquisition of new knowledge and skills) or development work (the use of already available knowledge and skills).
Third, the aspect of systematicity of the activities carried out for a specific purpose is important. These should be planned activities. Therefore, they cannot be incidental activities, unless the incidentality is due to the nature of the activities.
Fourth, what matters is the purpose of the activity – to increase knowledge or use existing knowledge for new applications.
For whom is relief?
First and foremost, income taxpayers carrying out R&D activities and subject to CIT or PIT according to the scale or flat tax.
The CIT Act also indicates who may NOT benefit from the relief. These are partly taxpayers benefiting from tax exemptions referred to in Article 17(1)(34) or (34a) (SEZ and Polish Investment Zone) – to the extent of costs included in the calculation of exempt income.
It is also apparent from the nature of the relief that it relates to research and development activities and not to the implementation of modern solutions. Therefore, the purchase of new technologies for purposes not related to R&D activity will not be subject to the relief.
IMPORTANT: Entities covered by SEZ / PIZ preferences may benefit from R&D relief to the extent that eligible costs are not included in the calculation of exempt income
Eligible costs
The CIT Act lists a general catalogue of costs that may be considered eligible costs. These are:
- Salaries with charges
- Acquisition of materials and raw materials
- Acquisition of specialised equipment
- Expert reports, opinions, consultancy and equivalent services from scientific entities
- Acquisition or use of scientific and research apparatus against payment
- Patents, utility model protection rights, industrial design registration rights
- Depreciation and amortisation related to R&D activities
Our support
If you are interested in:
– Assessment of eligibility for relief
– Interpretations of tax law
– Preparation of documentation and records
– Verification/support in settling the relief
please contact us.
