KRS Law Firm · Tax Optimisation
R&D Tax Relief / IP Box
IP Box provides preferential taxation of income from the sale of products or services based on intellectual property rights. The scheme is intended in particular to make research and development activity in Poland more attractive and encourage businesses to explore the commercial potential of intellectual property rights.
Practice Area
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What Is the IP (Intellectual Property) Box?
IP Box relief is intended for taxpayers conducting qualifying research and development activities who earn income from qualifying IP, meaning intellectual property covered by a patent or another protective right.
To benefit from the preferential 5% tax rate, a taxpayer may be a co-owner or hold the right to use the IP under a licence agreement. The legislation therefore does not require the taxpayer benefiting from the relief to be the sole owner of those rights.
Eligibility for the 5% rate on qualifying IP income does not depend on the entity’s size or the form of its research and development activity. Taxpayers do not need their own research and development centres: development activity carried out within their business may suffice.
- IP Box Provides Preferential Taxation.
- Analysis of business activities to identify work eligible for R&D relief.
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Rights Covered by IP Box Relief
Qualifying IP is an intellectual property right that meets all three of the following conditions:
- It has been created, developed or improved by the taxpayer as part of their research and development activity.
- It belongs to one of the statutory categories, including patents, industrial designs, utility models and copyright in computer programs.
- It is legally protected under separate legislation or international treaties ratified by Poland, or other international agreements to which the European Union is a party.
Qualifying IP must be created, developed or improved as part of the taxpayer’s research and development activity.
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Income Eligible for the Preferential 5% Tax Rate
Income or loss from qualifying intellectual property rights includes income arising from:
- Fees or royalties under a licence agreement concerning qualifying intellectual property rights.
- The sale of qualifying intellectual property rights.
- Qualifying intellectual property rights included in the sale price of a product or service.
- Compensation for infringement of qualifying intellectual property rights awarded in contentious proceedings, including court or arbitration proceedings.
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Conditions for Claiming Relief
The relief is subject to statutory requirements. The main conditions include:
- Conducting research and development activity.
- Creating qualifying intellectual property as part of that research and development activity.
- Maintaining separate records covering all financial transactions relating to qualifying IP income.
- Earning qualifying IP income taxable in Poland.
- Incurring eligible expenditure on the creation, development or improvement of qualifying IP.
IP Box Tax Preference:
Qualifying IP income is calculated by multiplying the income from the qualifying IP earned in the tax year by the nexus ratio calculated using a specific formula.
To calculate the tax base eligible for the preferential 5% rate, the taxpayer must therefore determine two key figures:
- The income from qualifying IP earned in the tax year; and
- The ratio by which that income is multiplied.
Qualifying IP income may receive preferential treatment to the extent that it is generated by the taxpayer’s research and development work. In other words, IP Box relief requires a link between the eligible income and the expenditure actually incurred to generate it.
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Combining IP Box and R&D Relief
Since 1 January 2022, taxpayers who commercialise R&D results, earn qualifying income under the IP Box rules and incur eligible R&D expenditure may apply both reliefs simultaneously. When determining qualifying IP Box income, they may deduct eligible R&D costs that led to its creation, development or improvement. Both reliefs could also be used before that date, but activities and costs had to be distinguished between individual IP Box and R&D projects.
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Claiming IP Box Relief
As a general rule, preferential taxation of intellectual property income is claimed after the end of the tax year by filing a tax return with a PIT/IP or CIT/IP attachment. During the year, taxpayers apply the general taxation rules and pay income tax advances accordingly. The preferential 5% rate is then applied when calculating tax due in the annual return. The difference between advances paid during the year and the resulting tax liability is treated as an overpayment.
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How Our Firm Helps You Claim IP Box Relief
Our support includes:
- Analysing business activities to determine eligibility for or implement the relief, including identifying qualifying research and development projects and obtaining the required legal protection for their results.
- Helping establish the records required to claim the relief.
- Assisting with claiming the relief in tax returns.
- Representing clients during tax audits or verification activities concerning their entitlement to IP Box relief.
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Research and Development Tax Relief
Research and development means systematic creative activity involving scientific research or development work, aimed at increasing knowledge and using it to create new applications. In practice, any business that improves its technologies, including production methods, products or services, or creates new ones, may meet the conditions for R&D relief.
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Who Can Claim the Relief?
R&D relief is available to different businesses regardless of their size or sector, provided they conduct development-oriented activity. They do not necessarily need to undertake scientific research, cooperate with research institutions or hold research and development centre status. Development activities can suffice and do not have to succeed: the outcome of the work is not decisive. Costs of projects started earlier may also be deducted.
The relief is primarily available to businesses carrying out research and development in Poland. Their activity should involve systematic scientific research or development work rather than isolated initiatives. Its purpose should be to discover new technologies, expand knowledge and identify new applications for inventions, fields of knowledge or production methods. Business development can therefore bring both commercial benefits and tax relief.
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How R&D Relief Works
Taxpayers claiming R&D relief deduct eligible research and development expenditure from the tax base in addition to treating it as a tax-deductible cost. The deduction limit depends on the type of business and the category of eligible expenditure:
100% — for businesses without research and development centre status;
150% — for research and development centres, with 100% of eligible expenditure on obtaining and maintaining patents.
A research and development centre is a scientific entity that conducts research and is not a research institute. Businesses awarded this status by the minister responsible for the economy provide technical and scientific support for specific industries and specialisms, including pharmaceuticals, medicine, energy, mining machinery production and IT engineering. Research and development activity is their common feature.
KRS Law Firm — Research and Development Tax Relief
What Are Eligible Costs?
R&D relief applies to eligible costs: expenditure incurred on research and development activities. These can include:
- Remuneration for home-based work.
- Remuneration under employment contracts for employees carrying out research and development.
- Social insurance contributions on remuneration, at least to the extent financed by the employer.
- Expenditure on raw materials and supplies needed for research and development activity.
- Expenditure on the use of scientific and research equipment.
- Expenditure on advisory services, commissioned opinions and expert assessments required for the business’s research.
- Depreciation charges.
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Benefits of Research and Development Activity
One benefit of R&D work is the possibility of claiming tax relief, recovering up to 19% of expenditure on research and development. This applies particularly to employee remuneration and materials. As these are costs the business incurs anyway, the additional deduction can provide further value.
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What We Offer
- Analysing business activities to identify work eligible for R&D relief.
- Helping adapt accounting records for R&D expenditure to the requirements of the relief.
- Reviewing and adapting internal documentation, including employment contracts, internal regulations and working time records, to R&D relief requirements.
- Supporting entitlement to R&D relief through an application for an individual tax ruling.
- Identifying projects that qualify as research and/or development work.
- Representing clients during tax audits or verification activities concerning entitlement to R&D relief.
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How KRS Law Firm Implements an R&D Programme
- Analysis of business activities to identify work eligible for R&D relief
helping adapt accounting records for R&D expenditure to the requirements of the relief. - Reviewing and adapting internal documentation, including employment contracts, internal regulations and working time records, to R&D relief requirements.
- Supporting entitlement to R&D relief through an application for an individual tax ruling.
- Identifying projects that qualify as research and/or development work.
- Representing clients during tax audits or verification activities concerning entitlement to R&D relief.
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