New R&D relief/retention of PIT advances/introduction of new products to the market

In TY 2022 it will be possible to take advantage of the new and extended tax reliefs aimed at supporting innovativeness, including manufacture and introduction to the market of the new products.

The new income tax regulations provide for i.a. the following tax incentives for taxpayers conducting research and development activity:

• The extension of the R&D tax relief through the possibility to deduct the eligible personnel costs in a triple amount and the right to retain by an employer of a part of personal income tax advances withheld from remuneration of employees engaged directly in R&D activity;
• The right to deduct from the taxable base the costs of trial production and introduction into the market of a new product;
• The right to deduct from the taxable base expenses incurred to increase the revenues from the sale of goods;
• The right to use R&D as well as IP Box tax reliefs simultaneously.

What are the reliefs about?

The package of tax changes known as the Polish Deal introduces several new tax reliefs aimed at supporting the innovativeness of enterprises as well as extends the scope of some reliefs that have already existed.

The new incentives may be used by taxpayers conducting research and development activities, creating new products and introducing them to the market, as well as obtaining revenues from the commercialization of intellectual property rights.

One of the changes is the extension of the scope of the R&D tax relief. Expenses related to the employment of individuals performing research or development works (e.g. software engineers or developers) may be deducted from the tax base in a triple amount. Moreover, if a taxpayer incurs a loss or his income is to low to deduct the full amount of eligible employees costs, he will be entitled to retain personal income tax advances withheld on the remunerations of persons directly involved in R&D, in the amount resulting from the multiplication of non-deducted employees costs and the CIT rate applicable to the taxpayer in a given tax year (9% or 19%).

This solution may be particularly beneficial for taxpayers conducting R&D activity, who cannot deduct the full amount of eligible costs, because their income is limited by the margin specified for transactions with related entities, which purchase research and development results from the taxpayer.

If, as a result of R&D works, the taxpayer creates a new product, the costs of trial production and the costs of introducing such a product to the market may also be deducted from the tax base. The amount of the deduction, however, will be limited to 30% of the sum of the costs of trial production of a new product and launching a new product on the market, not more than 10% of the income earned by the taxpayer from business activities.

The costs of trial production and the costs of introducing a new product to the market may include, inter alia, purchase price of brand new fixed assets necessary to start trial production of a new product, costs of purchasing materials and raw materials purchased solely for the purpose of trial production of a new product, costs of research, expert opinions, preparation of documentation necessary to admit the product to the market, costs of product life cycle testing, etc.

It should be stressed that for the purpose of the deduction, only tangible current assets in the form of finished goods manufactured or processed by the taxpayer are considered as products. This category does not include services.

Another tax relief provided for under the Polish Deal is the possibility of deducting from the tax base the tax deductible costs incurred by the taxpayer in order to increase the revenues from the sale of products. Such costs may include, for example, expenses related to participation in trade fairs, costs of purchasing advertising space, preparing a website, press publications, brochures, information catalogs and product leaflets, costs of adapting product packaging to the requirements of contractors, costs of preparing documentation enabling the sale of products or joining to the tender.

The amount of the deduction may not exceed the income obtained by the taxpayer in the tax year from business activity, but not more than PLN 1,000,000 in the tax year.

The Polish Deal also introduces the possibility of using the R&D relief and the IP Box relief at the same time. This solution enables the taxpayer to deduct the costs incurred on R&D activities (eligible costs) from the income from commercialization of qualified intellectual property rights, subject to taxation of 5% tax rate under the IP Box tax relief.

How can we help?

Our goal is to support you in finding solutions tailored to the specifics of your company's operations, which may result in a reduction of the tax burden. We approach each client individually, analyzing whether his activity may entitle him to take advantage of the available tax incentives.

Apart from preparing tax opinions and analyzes, we offer assistance in the implementation of recommended tax solutions, e.g. by calculating the amount of eligible costs in R&D relief or completing tax returns and information.

We also undertake activities aimed at securing the legal position of taxpayers in relation to tax authorities (e.g. by preparing applications for binding tax interpretations and representing taxpayers in court disputes with tax authorities).