R&D tax relief

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R&D tax relief may be applied by taxpayers who within their business activity incur costs regarding Research and Development activity understood as a creative activity involving Research and Development work (so called eligible costs). It is worth to benefit from it!

What does R&D tax relief actually means in practice?
This means that in addition to deducting operational costs treated on a general basis as tax deductible, a business entity is entitled to benefit from an additional deduction, which is made in a tax return, that reduces the amount of tax due.

New rules

An amendment to the rules concerning R&D tax relief came into force on 1 January 2017, making it more attractive by increasing the deductible amounts and expanding the list of eligible costs as well as extending the deadline for deduction and implementing specific rules regarding startups.

How can we help?

  • Identification of R&D activities with regard to the possibility of benefitting from R&D tax relief.
  • Mapping of eligible costs.
  • Reviews and changes within internal documents and policies.
  • Obtaining tax rulings confirming and securing the application of R&D tax relief.
  • Comprehensive support concerning potential tax audits and verification activities related to application of R&D tax relief (consultations, draft letters, representation before tax authorities).

Who can benefit from R&D tax relief?

R&D tax relief may be applied by taxpayers who within their business activity incur costs regarding Research and Development activity understood as a creative activity involving Research and Development work, undertaken in a systematic manner in order to increase the stock of knowledge and the utilization of knowledge to devise new applications.

R&D tax relief concerns, as a rule, all companies, independent of their size or industry. It is very common for taxpayers to not realize that the possibility of benefitting from this relief applies to their companies.

It is possible to benefit from R&D tax relief with regard to projects which are in progress, which started in previous years and for which expenditures are incurred at present. The effects of Research and Development activity does not affect the right to benefit from R&D tax relief.

The opportunity to benefit from R&D tax relief is excluded by:

  • running operations within a special economic zone (an SEZ)
    on the basis of a permit for a given year
  • reimbursment of eligible costs in any form (e.g. by a grant).

Eligible costs

  • salaries and contributions financed by the employer
  • materials and raw materials
  • use of reasearch equipment
  • expert reports, opinions, advisory services and equivalent services, and the acquisition of research work performer by scientific units
  • depreciation of fixed assets and intangible assets
  • costs related to obtaining and/or renewin a patent for an invention, the right to protect a utility model or the registration of an industrial design acquired by SME taxpayers

Limits for deductions

Provisions specific for startups

Provisions concerning R&D tax relief provide specific rules for taxpayers commencing their business activity.

In the case of a taxpayer who in the year of starting their business activity incurred a loss or whose income was lower than the amount of the deductions to which they were entitled, the taxpayer is entitled to receive a refund.

EXAMPLE

During the first year of its business activity a start-up incurred costs of R&D activity (eligible costs) in the amount of 50,000 PLN (50% x 50,000 PLN = the amount of deduction, i.e. 25,000 PLN). Bearing in mind that the taxpayer incurred a loss and there is no possibility to deduct eligible costs from its income, the taxpayer is entitled to apply for a refund of 4,500 PLN (18% x 25,000 PLN).

With regard to SME taxpayers, the possibility to receive a refund also applies to the tax year following the commencement of the business activity.

Such provisions are not applicable to startups established as a result of transformation, division or merger.

If a taxpayer becomes bankrupt or goes into liquidation within three tax years from the end of the tax year for which the return was filed, the taxpayer is required to pay back the received amount.