The Director of the National Tax Information (Director of KIS) has recently issued several significant individual tax rulings concerning R&D tax relief for taxpayers creating innovative solutions and preferential taxation of income from qualified intellectual property rights (IP Box relief). These rulings are related i.a. to conditions of recognizing specific categories of costs as qualifying costs for the purposes of R&D relief and the possibility of applying preferential 5% taxation (IP Box).
TRANSPORT TO A CLIENT IS NOT CONSIDERED QUALIFYING COST (R&D relief)
Expenses borne on transport to a client in order to verify the correct functioning of the sold product cannot be considered qualifying costs under the Article 18d (2) point 2 of the CIT Act. In the presented case company’s activity focuses on the production of systems for fencing gates. Production was individualized and the models (prototypes) produced on a monthly basis differed from the company’s previous products. The company’s activity was carried out systematically as creative work aimed at creating new applications using the knowledge that constitutes research and development activity. One of the costs incurred was the cost of transport to the client in order to facilitate the supervision of the applications introduced in practice, installation, and correction of individual models. The tax authority decided that the cost of transport incurred by the company does not refer to materials and raw materials mentioned in Article 18d (2) point 2 of the CIT Act and it cannot be deducted as qualifying cost under Article 18d of the CIT Act.
EMPLOYEE CAPITAL PLANS AS QUALIFYING COST (R&D relief)
Expense in the form of contributions to Employee Capital Plans (PPK) paid by the employer, as an additional element of the employee’s remuneration, constitutes qualifying costs for the purposes of R&D tax relief. The cost of contributions to PPK meets the conditions indicated in Article 12 (1) of the PIT Act and Article 18d (2) point 1 of the CIT Act. Regarding the part of the contribution to PPK financed by an employee, it should be noted that the employee finances this part of the contribution from his own resources, derived from the remuneration. Therefore, only the remuneration financed by the employer may be considered a qualifying cost.
PREFERENTIAL TAXATION OF INCOME FROM TRANSFER OF COPYRIGHTS TO COMPUTER PROGRAM (IP Box)
Income generated as a part of R&D activity from the transfer of ownership rights to software legally protected pursuant to Article 74 of the Act on Copyrights and Related Rights may be considered income from the qualified intellectual property. As a consequence, the company may benefit from preferential taxation of income, applying a 5% tax rate within the so-called IP Box. Of course, other requirements provided by the PIT Act, including keeping separate detailed records specified in Article 30cb of the PIT Act, should be met.
The individual tax rulings issued by the Director of KIS on 1 July 2020, ref. No 0112-KDIL2-2.4011.331.2020.2.KP
QUALIFICATION OF EXPENSES ON EQUIPMENT FOR THE OFFICE (IP Box)
Expenses incurred by the company conducting activities in the field of creating, improving and modifying computer programs, which is R&D activity, borne in order to purchase specialistic literature related to IT, courses and training, purchase of program licenses, social security contributions, accounting services, purchase of electronic equipment (e.g. smartphones, smartphone accessories, pendrives), purchase of pre-paid cards, office supplies (e.g. ink, paper, notebooks, digital prints), transport (e.g. public transport season tickets), workplace equipment (e.g. lamp, plants, coffee, air purifier, vacuum cleaner), which constitute tax-deductible costs for the company, are tax-deductible costs of the qualified intellectual property rights.
On the other hand, some of the expenses allocated to the equipment of the workplace, such as a lamp, plants, coffee, air purifier, vacuum cleaner, are not directly related to production, improvement, and development of software and should not be considered when calculating the Nexus indicator referred to Article 30ca (4) together with Article 30ca (5) of the PIT Act.
The individual tax rulings issued by the Director of KIS on 1 July 2020, ref. No 0112-KDIL2-2.4011.331.2020.2.KP
If you have any questions concerning R&D relief or Innovation Box relief, please contact our experts:
Łukasz Bączyk
Head of Tax, Board Member
E: lbaczyk@asbgroup.eu
Marta Skrodzka
Tax Manager – Tax Adviser
E: mskrodzka@asbgroup.eu
Piotr Szeliga
Tax Manager – Tax Adviser
E: pszeliga@asbgroup.eu
