10 December 2021

The tax department of Porębski & Wspólnicy law firm has successfully completed a project to implement the R&D tax relief for our client, obtaining a reduction in CIT taxation in the amount of nearly one million PLN for the period 2018-2020.

The R&D tax relief consists of – in some simplification – a possibility of counting the expenses on R&D activity in the double amount (for the years 2018 – 2021) as tax deductible expenses, and from the year 2022 some expenses on R&D activity will be able to be settled as tax deductible expenses even in the triple amount.

Research and development activity, as defined by the tax law, is a creative activity involving scientific research or development work, undertaken in a systematic manner in order to increase the knowledge and to use it to create new applications. Although at first glance the above definition seems to apply only to very specialized entities, in fact, activities undertaken by entrepreneurs in almost every industry (e.g. services, finance, manufacturing) can be classified as research and development.

However, not all expenses related to the above activities qualify for double or triple allocation as tax deductible expenses (as so-called qualified expenses). The category of qualified costs may only include expenses indicated in the regulations for: salaries (employment and civil law contracts), materials and raw materials, equipment, depreciation write-offs and patent protection costs. However, apart from certain cases specified in the regulations, expenditures on external services (e.g. expenditures on salaries of persons cooperating on R&D projects in the B2B model) are not eligible.

Implementation of the R&D tax relief is labor-intensive but can also be very cost-effective. The application of the R&D tax relief allows the taxpayer to receive a refund of the overpaid income tax. The taxpayer is entitled to the overpayment on the basis of the submitted tax return (submitted with a CIT/BR or PIT/BR attachment). In the case of relief for previous tax years (corrections of PIT or CIT returns), it is in addition necessary to obtain a decision of a relevant head of tax office confirming the overpayment.