R&D tax credit – eligible costs
The essence of the relief for research and development activities is the possibility of deducting from the tax base (income) expenses that constitute qualified costs incurred for the indicated activities. The legislator in the tax regulations has included a closed catalog of expenses that can form the basis for calculating the relief. Thus, a taxpayer under the relief is allowed to deduct from income only those expenses that fall into one of the statutory categories.
The legislator has distinguished the following categories of eligible expenses:
- Employee expenses – primarily salaries and contributions – are an eligible expense in proportion to the time spent by the employee on R&D-related tasks in relation to the employee’s total working time in a given period.
A taxpayer does not have the option of counting as an expense the salaries of collaborators employed under business-to-business (B2B) contracts. In addition to base salary, this category also includes the cost of business travel or employee benefits (medical packages, sports passes, additional insurance).
The taxpayer is not allowed to include the salaries of co-workers employed under business-to-business (B2B) contracts as expenses. In addition to base salary, this category also includes business travel expenses or employee benefits (medical packages, sports passes, additional insurance).
- Expenses of persons providing services on the basis of a contract of mandate or contract for specific work
In this case, excluded from this catalog will be expenses under a contract of mandate or a contract for work concluded with persons engaged in economic activity
3. Acquisitions of materials and raw materials are expenses directly related to R&D activities, i.e., costs strictly related to R&D activities that have been actualized as a result of expenditures on materials and raw materials. This category can include the costs of fuel, energy, plastics, dyes, among others.
4. Acquisition of specialized equipment – this category includes costs incurred for the purchase of equipment that is not fixed assets used directly in the R&D activity. The CIT Law / PIT Law indicates that, in particular, this may include the purchase of laboratory utensils and instruments and measuring equipment.
5. Expert reports, opinions, consulting services and equivalent services, however, may constitute an eligible cost only if they are purchased from entities with the status of scientific entities. The indicated entities include, among others, universities, federations of entities of the higher education and science system, scientific institutes of the Polish Academy of Sciences, research institutes, international scientific institutes established on the basis of separate acts operating in the territory of Poland, the Polish Academy of Arts and Sciences and other entities conducting mainly scientific activity in an independent and continuous manner.
6. Paid use of scientific and research apparatus, acquisition of services for the use of such apparatus – the meaning of the term “scientific and research apparatus” is not clarified in the tax legislation, so it should be assumed that this category includes sets of research, measurement or laboratory equipment with a small degree of versatility and high technical parameters. On the other hand, the indicated “paid use” means use on the basis of any contract granting the right to use the apparatus. Expenses for paid use under a contract with a related party are excluded from this category.
7. Obtaining and maintaining a patent, protection right, right from registration of an industrial design, related to R&D activities.
8. Depreciation write-offs on tangible and intangible assets related to R&D. For example, this category may include depreciation write-offs on the value of electronic equipment, computer equipment, automated production machinery, technical apparatus, system design programs. Excluded from this category are depreciation write-offs on passenger cars and structures, buildings and premises under separate ownership.
Records of employee time spent on R&D work performed is essential to qualify for relief for expenses incurred on employee salaries. This is a very important element in particular when a given employee performs both work related and unrelated to the company’s R&D activities. In such a case, it is necessary to calculate the time spent on both areas and to adopt a “ratio key” by which the entrepreneur is able to calculate the amount of time worked and the costs incurred in the R&D work performed.
Within the framework of individual interpretations issued, the tax authorities confirm that the following type of expenses can benefit from the preference related to R&D relief activities:
- Employees’ salaries including base pay and overtime pay, bonuses, allowances.
- contributions to employee capital plans.
- depreciation charges on fixed assets and intangible assets related to:
– licenses and copyrights;
– computer and electronic equipment (including servers, computers, laptops, monitors);
– office equipment and supplies.
- depreciation costs of fixed assets and intangible assets in the part in which they are used in R&D activities, among others, on the necessary software, computer equipment or electronic equipment.
- costs of materials used in work on the implementation of a given project, including, among others, electricity, software, computer equipment and costs of office supplies for employees, professional literature.
- costs associated with the use of scientific and research equipment for a fee, e.g.: the cost of performing vibration tests, performing tomographic examination of components.
At the same time, the tax authorities have ruled that the following expenditures cannot be eligible costs for the purposes of the R&D tax credit:
- the cost of purchased equipment that will be transferred to the customer after special configuration.
- costs of maintaining various types of software that are not intangible assets for the taxpayer, as well as costs of leasing computer equipment,
- costs of renting premises/real estate.