Check out what benefits your company may get from Research and Development (R&D) tax relief
The R&D tax relief is an opportunity to get additional funding by way of deducting certain research and development expenses (eligible expenditure) from the tax base. These expenses reduce your income as being “regular” tax-deductible costs, and on top of that, they reduce the tax base used for calculating due CIT or PIT.
For example, a taxpayer who has incurred expenses for the remuneration of software developers involved in R&D works may deduct these expenses from the tax base. It means that for every PLN 100 spent on remuneration, the taxpayer receives an additional benefit in the amount of PLN 19 (on top of the fact that these expenses are recognised as tax deductible costs by default).
What is essential is that the R&D tax relief does not preclude claiming the IP Box tax relief.
Who is eligible for R&D tax relief?
R&D tax relief can be claimed by taxpayers who invest in research and development activities, as defined in the act, in their business activity.
The research and development activity is any creative activity involving research or development that is being undertaken in a systematic way in order to enhance the know-how and use it to establish new applications.
Our experience shows that R&D tax relief can be successfully implemented in most entities operating in the IT industry. The reason behind it is that the legislator has explicitly stated that research and development activities are any works related to purchasing, combining, shaping and using available know-how and skills in the field of IT tools or software, provided that their purpose is to come up with modified, improved or new products, processes or services.
R&D activities may include both creating brand new products (new software) and improving the software in place through adding new functionalities. They may also include selected projects under which software must be adjusted to customer requirements.
R&D activities do not necessarily have to be a success as such. The R&D tax relief can be claimed e.g. on testing new products, developing prototypes, etc.
Check what expenses are eligible for deduction
Only certain expenses, referred to as ”eligible expenditure” can be deducted under the R&D tax relief. A precondition for this deduction is to make an appropriate separate entry in the taxpayer’s accounting records for research and development costs.
What is crucial for the IT industry is the fact that remuneration of persons actually involved in research and development works, such as software developers or their coordinators, can be recognised as an eligible expenditure. This includes the costs of remuneration (paid under a contract of employment, contract of mandate or contract of specific work) and related social security contributions. However, expenses related to persons employed under B2B contracts cannot be claimed under the R&D tax relief at the moment.
What is more, eligible expenditure may include:
- purchase of materials and raw materials as well as specialist equipment related to R&D activities;
- expert studies, opinions, consultancy and equivalent services, either provided or performed by a research institution under a contract;
- use of scientific and research equipment against payment;
- costs of obtaining and keeping a patent, right of protection, etc.;
- depreciation write-offs on fixed assets and intangible assets used in R&D activity (excluding cars and buildings).
More benefits for Startups and Research and Development Centres
R&D tax relief regulations include special regulations for Startups. A Startup they may receive a cash reimbursement of the R&D tax relief if, in the year of starting their business activity, they either incurred a loss or generated income lower than the amount of deduction they are entitled to under the tax relief in a given year.
The R&D tax relief is also particularly attractive for entities with the status of a Research and Development Centre within the meaning of separate regulations. In certain cases, these entities may deduct as much as 150% of eligible expenditure from their tax base.
R&D tax relief will have a retroactive effect
If your business has not claimed the R&D tax relief in previous years (the tax relief has been available since 2016), you still have a chance to do it! The regulations in force do not preclude claiming the R&D relief by way of adjustment of past tax returns.
Claim your R&D tax relief with the support of RSM Poland experts
RSM Poland experts have practical experience in consultancy on R&D tax relief, with a special focus on consultancy for businesses operating in the IT sector. Therefore, we can offer entrepreneurs our comprehensive support in implementing this tax relief, where we can, among others:
- verify your business to identify any research and development activities;
- define the costs of R&D activities and help to calculate them;
- analyse the documentation justifying your right to claim the tax relief and meet the remaining formal obligations (including appropriate recording of the expenditure);
- file a request for an individual tax interpretation in order to make sure that the R&D tax relief is implemented as safely as possible;
- prepare an adjustment of your past tax returns in the case of implementing the tax relief in respect of any closed fiscal years.
Check whether your company can claim the R&D tax relief. Rely on the expertise and experience of RSM Poland experts and recover part of your expenditure on innovation.
Contact Piotr WYRWA, tax advisor, who will answer any questions you may have:
T: +48 61 8515 766