R&D relief – what does it consist of and who can benefit from it?
The R&D tax credit was introduced by the legislature in 2016, but since then it has gained significantly in attractiveness – the amount of maximum deductions under the credit currently reaches 200% for employee expenses and 100% for other expenses. Over the years, the catalog of expenses eligible for deduction under the relief has also been expanded, which has also increased its popularity.
What does the relief consist of in practice?
The R&D relief consists in the possibility of “double” deduction from the tax base of expenses incurred for R&D activities (so-called qualified expenses) – the first time a taxpayer does this when the expenses are included in deductible expenses under the general rules, and then a second time the same expenses can be deducted from the tax base in the annual return.
Who can benefit from the relief?
The relief is addressed to all PIT taxpayers conducting business activity in Poland, taxed on a scale or flat tax, and to CIT taxpayers earning income other than from capital gains who conduct research and development activities.
As mentioned above, the condition for taking advantage of the tax preference is to conduct research and development work, but it is not necessary to have separate departments engaged in R&D activities or to have the status of a research center. The relief primarily covers work focused on creating new products and improving existing ones. The products produced do not have to be new on a global scale, a company-wide development is sufficient to improve its own business processes, for example.
The essence of the relief is the effort put into the development work, and neither the place of business nor the conditions in which the work was carried out is important – the entitlement to take advantage of the preference applies both to entrepreneurs carrying out creative work in an ordinary office, on the production floor, and those operating in a professional laboratory.
Also, the effect of the work, i.e. whether the manufactured product was finished or sold at a profit, is irrelevant. The relief provides credit for costs related to research and development work, regardless of the final result. What counts are the expenses incurred and the efforts of the employees.
Eligible costs
According to the CIT Act and the PIT Act, eligible costs may include:
- employees’ salaries and social and pension insurance premiums paid to them, as well as additional employee benefits, in such proportion that the time spent on R&D activity remains in the employee’s total working time in a given month;
- expenses for the purchase of raw materials, materials directly related to R&D activities;
- depreciation write-offs on fixed and intangible assets for equipment/equipment used in R&D activities;
- expenditures on the acquisition of equipment (which are not fixed assets) that are used in R&D activities;
- expenditure on expert opinions, opinions, consulting services and equivalent services provided by an entity that is a scientific unit;
- expenses for paid use of scientific and research apparatus;
- costs of obtaining and maintaining a patent, right of protection for a utility model, right from registration of an industrial design.