A draft of the tax act has been published to introduce a tax relief system for companies in CIT and PIT. The system of reliefs is intended to encourage entrepreneurs to innovations and will include the following elements:
- research and development relief supporting works on a new product, service, or process;
- relief for employing innovative employees, encouraging employment of specialists with key skills;
- prototype relief, supporting the implementation of an idea to production;
- IP Box tax relief, operating simultaneously with R&D relief, which will reduce the tax burden of obtaining income from the new products’ sale;
- relief for investing through Venture Capital Trusts in innovative enterprises;
- robotization relief, which will enable an opening of a production line dedicated to the product.
Changes in R&D relief
Currently, taxpayers with the status of a research and development center (RDC) may deduct from the tax base 150% of tax-deductible costs incurred in the tax year for R&D, i.e costs specified in the CIT Act. The proposed solution introduces the possibility for the RDC to deduct 200% of costs listed in the CIT Act as part of the R&D relief. The change will also apply to costs related to obtaining and maintaining a patent, protection rights for a utility model, rights from registration of an industrial design – so far, the deductions for these costs were determined as 100% of their amount.
In addition, the draft amendment proposes changes in the number of deductions of eligible costs related to the employment of employees who carry out research and development activities. The proposed solution introduces the possibility of deducting such costs in the amount of 200% for all taxpayers, including those who do not have the RDC status.
Relief for innovative employees
It is proposed to introduce a new catalog of eligible costs including receivables paid under an employment contract or under civil law contracts to employees who devote at least 50% of their working time provision to research and development activities. In accordance with the proposed regulation, a taxpayer who conducts R&D activity will be able to deduct eligible costs related to innovative employees from advances for income tax and flat-rate income tax.
The draft provides the possibility of deducting from the tax base the costs of trial production of a new product or introducing such a product to the market. The relief is addressed to those taxpayers who, as a result of research and development works, have produced a new product. The relief will cover the costs incurred until the start of production of the new product. It is assumed that costs incurred in the period from the beginning of the technology start-up phase to the start of production of a new product will be deducted. It is assumed that the above costs will be disclosed in the annual tax return submitted by the taxpayer for the tax year in which the costs will be incurred, with the possibility of deducting them also in the next two years immediately following the year in which they were incurred. The proposed tax relief should positively influence the modernization and diversification of the range of products available on the market. According to the draft, the value of the deduction shall not exceed 30% of the costs incurred, but not more than 10% of income from business activities.
Simultaneous IP Box relief and R&D relief
Currently, it is not possible to apply the R&D tax relief and the IP Box rate to the same income. The project aims to introduce the possibility of simultaneous application of the R&D tax relief by a taxpayer earning income from intellectual property rights covered by the IP Box regime. The solution is aimed at stimulating investments of enterprises, especially in those areas that may contribute to strengthening or building a competitive advantage. According to the draft, a taxpayer commercializing the results of research and development works and generating qualified income from them will not be obliged to choose, at the end of the tax year, between two “mutually exclusive” preferences. The proposed change will enable their simultaneous application.
Relief for investing through Venture Capital Trusts
The VCT invests in a number of small unlisted companies allowing investors to spread their risk, similar to holding stocks in an ordinary trust. The relief for investments in Venture Capital is intended to encourage individuals to invest in companies whose operation involves high economic risk. This relief introduces the possibility of deducting from the tax base 50% of expenses for the acquisition of shares or shares of an alternative investment company, or a company in which the alternative investment company holds at least 5% of shares, provided that such shares are held for at least 2 years. However, the deduction cannot exceed PLN 250,000 in a tax year. The right to deduct from the tax base will be available to taxpayers who earn income taxed on general terms according to the tax scale (17% and 32% rate), and taxpayers who earn income from non-agricultural business activities taxed at a 19% rate.
Currently, Polish tax regulations do not provide for instruments supporting robotization. The planned tax relief will function in a shape similar to the current relief for research and development. The taxpayer conducting industrial activity will have the right to deduct from the tax base costs related to robotization, which have already been classified as tax-deductible costs. The additional deduction cannot exceed 50% of the cost. The main benefits of implementing industrial robots among entrepreneurs are the increase in production, improvement of the company’s competitiveness, lower production costs, and improvement of the quality of manufactured products.
We will keep you informed about further actions regarding the innovation package.
Head of Tax, Board Member
Tax Manager – Tax Adviser