The IP Box is a tax incentive in Poland designed to attract businesses in the research and development sector. It aims to incentivize the introduction of innovation and new technology in Poland by offering a reduced tax rate of 5% for income generated from the commercialization of intellectual property rights that are developed or improved as a result of R&D activities. However, some entrepreneurs may have questions about the implementation of this solution, which this article will explore.
IP Box in Poland- what is it?
The IP Box relief means the application of a preferential tax rate of 5% in place of the standard tax rates (12%, 19%, 32%).
It may apply if the revenues are obtained as part of business activities related to the intellectual property rights. It can be used by those who, in their research and development activities, led to the creation, development or improvement of a qualified IP.
What is important, R&D operations do not have to be performed by the taxpayer in its own research and development centres. Not every taxpayer has research and development centres in its structures.
Using the IP BOX relief requires the maintenance of certain records. They are used for the purpose of calculating income from qualified IP.
To calculate income from qualified IP, it is important that these records are kept in a way that enables showing in the annual tax return the total sum of revenue, tax expenses, income, losses, income subject to the 5% tax rate, and income that will not be covered by the preferential taxation. In Polish New Deal, the IP Box relief can be combined with the R&D relief.
Time frame for choosing the IP Box
Taxpayers cannot use this relief during the tax year by reducing income tax advances.
Who can use the IP BOX tax relief?
The IP BOX tax relief is not only for natural persons. It does not matter whether you conduct business in the form of a company or not. The preferential 5% tax rate may be used by all taxpayers who meet the conditions of the PIT and CIT Act, i.e.
- entrepreneurs with a sole proprietorship,
- inherited enterprise,
- civil law partnership
- general partnership
- limited liability partnership
- limited partnership
- limited joint-stock partnership
- limited companies ( LLC, simple joint-stock company, joint-stock company)
Qualified intellectual property rights
Among the so-called qualified intellectual property rights there are:
- protection right for a utility model,
- right in industrial design registration,
- right in registration of integrated circuit topography,
- additional protection right for a patent for a medicinal product or a plant protection product,
- right in registration of a medicinal product and veterinary medicinal product admitted to trading
- the exclusive right indicated in the Act of 26 June 2003 on the legal protection of plant varieties (Journal of Laws of 2018, item 432),
- copyright to a computer program
They qualify under following conditions:
- they are subject to legal protection under the provisions of separate acts or ratified international agreements to which Poland is a party, and under other international agreements to which the European Union is a party,
- the subject of protection was created, developed or improved by the taxpayer as part of its research and development activities.
Research and development activity (R&D)
R&D should be understood as a creative activity involving scientific research or development work. It must be undertaken in a systematic manner. Its aim is to increase knowledge resources and use them to create new ways of application.
We can talk about research and development activity if:
- activity is of a creative nature – the result of human activity is creative and there is a new product of the intellect,
- activities are conducted systematically – conducting activities in an orderly manner, according to a certain system, in a methodical, planned and organized way,
- It is enough to plan and proceed with at least one R&D project, assuming specific goals to be achieved, and adopting certain programme and resources. Such activity qualifies as systematic, i.e. it is carried out in a methodical, planned and organized manner.
- The activity increases knowledge resources and leads to using them in a new way. R&D activity is a set of actions leading to creation, including scientific research and development works. The research shall be led towards new knowledge and skills. The development works should orient towards a new use of the available knowledge and skills. The goal of these activities is to increase knowledge that could be used to create new, changed or improved products, processes or services (also in the form of new technologies).
How can we help you?
We can help to verify whether you qualify for the IP Box tax relief.
We provide comprehensive legal and accounting advice for the settlement of PIT or CIT with the use of IP Box relief. Our focus is on providing legal security and optimizing tax burden during tax settlements. We offer the implementation of tax and accounting regulations. Our accounting services include, among other things, income from qualified IP and the nexus index. These elements are necessary to qualify for the IP Box relief.
We will prepare an application for an individual tax interpretation, which will guarantee the taxpayer that he correctly settles the tax with the IP Box relief.
We assist in the settlement of annual corporate income tax (CIT) and personal income tax (PIT) to ensure that IP Box relief is correctly qualified.
Are you looking for an accountant in Poland or a payroll services provider in Poland? Specialists from our accounting firm in Poland, Warsaw will be happy to help. If you are interested in company formation in Poland visit our dedicated landing page.