The modern world is evolving dynamically and continuously under the onslaught of ever-evolving technologies. Digital revolutions, artificial intelligence, blockchain and the internet are just a few examples of innovations that have changed people’s lives and environments in ways that were unimaginable just a few decades ago. However, in the context of law in particular, new challenges are emerging alongside new opportunities. That is why we are looking at the relationship between tax law and new technologies, with a particular focus on tax relief in this area. Fortunately, there is a lot to choose from.
R&D Tax Relief
R&D Tax Relief is available to taxpayers who carry out research and development activities. Such activities should consist of the use of existing knowledge to create or improve products, processes or development services. It is also important that these activities are carried out on a regular basis and not on an occasional basis.
This relief allows companies to deduct eligible costs incurred for ongoing research and development activities. These include expenditure on the purchase of materials and raw materials, expert opinions, consultancy services, the use of scientific and research equipment and personnel costs.
PIT and CIT taxpayers may deduct the amount of costs allocated to research and development activities, which may not exceed the amount of income generated in a given tax year. In general, the R&D Tax Relief allows taxpayers to deduct 100 % of the costs incurred for research and development activities and, in the case of employee remuneration, the deduction can reach up to 200 % of the costs incurred.
IP Box
Another notable relief is the Innovation Box or IP Box. It allows companies to apply a preferential tax rate of 5 % to income earned from eligible intellectual property rights.
In order to benefit from the IP Box, an intellectual property right should fulfil three conditions:
- It must be created, developed or perfected by the taxpayer in the course of its R&D activities
- It must be eligible, i.e. qualify as:
- A patent
- A utility model protection right
- A registration right to an industrial design
- A supplementary protection certificate to a patent for a medicinal product or a plant protection product
- A registration right for an authorised medicinal product or a veterinary medicinal product
- A copyright to a computer programme
- It must be legally protected in accordance with individual provisions contained in separate acts or international agreements approved by the Republic of Poland, as well as other international agreements to which the European Union is a party.
The IP Box applies primarily to income derived from:
- Sales of eligible IP
- Fees or royalties received under licence agreements relating to eligible IP
- Profits from eligible IP included in the sale price of a product or service
It is worth noting that from 2022, the R&D and IP Box reliefs can be applied simultaneously.
Robotisation Relief
A relatively new facility for businesses is the Robotisation Relief, which was introduced in January 2022 as part of the so-called ‘Polish Deal’ and allows investment in new industrial equipment.
The Robotisation Relief allows companies to make an additional deduction of 50 % of the deductible costs incurred for the purchase and implementation of industrial robots. Companies can benefit from this relief if they decide to use industrial robots to streamline their production processes.
Examples of costs that may be deducted as part of the robotisation expenditure include expenditure on the purchase of new production assets, such as industrial robots or machinery and peripheral equipment that are functionally related to industrial robots. Expenditure on the acquisition of intangible assets necessary for the proper commissioning and use of industrial robots and the above-mentioned fixed assets may also be deducted.
Prototype Relief
Prototype Relief is also worth mentioning. In a nutshell, this relief facilitates the implementing of an entrepreneur’s idea into a real product. It can be used by entrepreneurs who pay income tax, whether PIT or CIT.
Currently, prototype relief allows a company to deduct an additional 30 % of its expenses from its tax base, provided that the relief does not exceed 10 % of the company’s income.
A company that decides to develop a prototype will be able to treat the costs associated with its production as deductible costs. Examples of the costs of prototyping include the purchase price or manufacturing cost of the fixed assets necessary to start production or the costs of purchasing the materials and raw materials necessary to make a prototype.
Summary
Regulations are changing at a rapid pace, making it difficult to take advantage of all the technology reliefs available. This is further complicated by the inconsistent approach of the tax authorities. Therefore, if you are considering using a particular relief, it is worth doing a thorough analysis of the tax legislation and checking whether you are actually entitled to it.
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