R&D tax relief

What is R&D tax relief

On January 1, 2018 the amendment of the regulations concerning the relief for research and development activity came into force. It gives entrepreneurs even wider possibilities of using this relatively new tool in business activity. R&D relief is currently the most attractive form of supporting research and development activity on the Polish market. This simple mechanism allows taxpayers to deduct from the tax base the costs incurred on R&D activity, the so-called eligible costs.

Research and development activity should be understood as creative activity covering scientific research or development works, undertaken in a systematic manner in order to increase knowledge resources and use knowledge resources to create new applications. In practice, any company which improves its technologies (including production technologies), products and services or creates new ones from scratch may fulfil the conditions for eligible R&D activities.

R&D relief is not the only advantageous tax instrument given into the hands of entrepreneurs. Eligible R&D activities should also be analysed in terms of the possibility to take advantage of the additional Innovation Box / IP Box relief (5% CIT on revenues from rights related to R&D activities), as well as the introduction of increased costs of obtaining revenue from creative activities.

Who can take advantage of the R&D relief?

The possibility to take advantage of the relief applies to all entrepreneurs regardless of the size of the enterprise and the industry in which they operate. The condition for taking advantage of the relief is only to conduct development activities (no scientific research, the status of R&D centre or cooperation with scientific entities is required). It is also possible to deduct the costs of projects started in previous years.

The right to take advantage of the R&D relief is available regardless of the final result of the research. The R&D relief is also available to entrepreneurs operating in SEZ within the scope not covered by the income tax exemption.

Eligible costs in R&D tax relief

Eligible costs are as follows:

• remuneration, including for contractors and performers of the work + social security contributions on these wages (to the extent relatively propotional to the extent of the time spent by them on R&D activities remains until the entire duration of the contract or work)
• costs of paid use of scientific and research equipment
• costs of acquisition of equipment, materials and raw materials directly related to the research and development activity, other than fixed assets

Limits on the deduction of eligible costs:

• 100% - for companies that do not have the status of research and development centres
• 150% - for companies that have the status of a research and development centre

R&D tax relief - how can we help you?

Our experts offer the following services for research and development activities:

The mapping of R&D processes, individually tailored to your needs, for the purpose of:

• identification of projects qualifying as development and/or research works
• determining the place of origin and defining eligible costs
• identification and protection of potential risk areas, consisting in protection of the right to relief by creating necessary internal documentation and obtaining individual tax interpretations (in case of a potential audit of tax authorities).
• support in adjusting the accounting records of R&D expenditure to the objectives of relief
• review and adjustment of existing internal documentation, i.e. contracts with employees, regulations or work time records to the requirements of R&D relief
• a range of services related to the Innovation Box / IP Box - more on this subject can be found here.