Research and Development relief

What is the research and development relief? (hereinafter: "R&D relief")

The R&D relief has been in force in Poland since 2016 - it is a solution that allows entrepreneurs conducting research and development activities to additionally deduct from the tax base the amount of expenses incurred related to research and development work.

What activities can be considered R&D?

R&D activity includes improvement or development of new or existing products, processes or services, including the creation, design of new, changed or improved products, services or processes, as well as works consisting in the development of prototype systems and pilot projects.

For example, in the activities of IT companies, the following work may be considered as R&D work:

a) creating artificial intelligence quotients and functionalities for the needs of the application,

b) creating and developing new web applications offering solutions in the field of automation,

c) creating IT platforms,

d) development of new applications,

e) creating computer games.

The subject of R&D activities in the IT industry does not include routine activities such as creating websites or routinely removing errors from systems and programs.

What eligible costs can be deducted under the R&D relief?

As part of the R&D relief, an entrepreneur can deduct, among others:

• Up to 200% of expenses incurred on employee remuneration, related to employees employed on the basis of an employment contract, mandate contract and contract for specific work, in the part in which a given employee actually performs activities under R&D projects - until 2022 it was possible deduction of up to 100% of the above expenses.

• Up to 100% of expenses incurred, among others, on:

a) materials and raw materials used for R&D activities,

b) depreciation of fixed assets and intangible assets used for the conducted R&D activity,

c) costs of obtaining and maintaining a patent, utility model and industrial design.

What if the amount of eligible R&D costs is higher than the generated income?

If the amount of eligible R&D costs is higher than the amount of deduction in a given tax year, the entrepreneur may:

1. Deduct the unused R&D relief in successive 6 tax years - deductions will then be made from the income earned in that period, or / and,
2. Take advantage of the relief for innovative employees, which allows you to reduce advance payments for income tax on salaries of the so-called innovative employees - starting from the month following the month of submission of the annual declaration.
3. In the case of start-ups - during the first two years of operation, it is also possible to obtain a cash refund - which depends on the value of eligible costs and the selected form of taxation. 

How to take advantage of the R&D relief?

In order to take advantage of the R&D relief, taxpayers should first of all:

1. Identify projects that qualify as R&D projects,
2. Keep separate records, which will show the eligible costs incurred under the above - mentioned projects,
3. Submit annual tax return declarations together with the CIT-BR or PIT-BR attachment.

How can we help?

Beginning of a new year is the right time to start analyzing the potential to take advantage of the preferences under the R&D relief. As part of cooperation with Mazars, we offer you a free consultation, during which we will provide you with more details on the benefits of the R&D relief and make a preliminary assessment of whether your activity can be considered R&D.