From this article, you will learn:

• How the research and development relief works and what its definition is?
• How research and development activities are understood by tax authorities?

Research and development activities allow you to apply for considerable reliefs. However, taxpayers who want to benefit from tax preferences must prove that they meet the necessary conditions. Unfortunately, Polish regulations do not clearly define these requirements. Then, taxpayers must seek answers from the Director of the National Tax Information. However, the way in which tax authorities define expenditure on research and development work is not always in line with the expectations of entities operating in the IT industry.

What is the R&D relief? Pro-fiscal approach of the Director of the National Tax Information to the definition of research and development activities

The R&D relief is a preference existing in both PIT and CIT. This is a tax relief that allows you to deduct expenses related to research and development from your tax base. 

Research and development work should be understood as carrying out investments that must have the characteristics of creative activity and include scientific research or development work. These investments must be carried out in a systematic manner. 

The above definition proposed by the legislator is unclear not only for the taxpayers themselves, but also – as real life shows – for the tax authorities, who often interpret it incorrectly, thus narrowing the group of entrepreneurs who could benefit from the R&D relief. Such taxpayers receive help from administrative courts, which have recently presented a uniform – and positive from the entrepreneurs' point of view – jurisprudence.

The courts' position on the R&D relief for programmers

IT specialists running a sole proprietorship often have doubts as to whether their activities can be classified as research and development activities, allowing for the application of the R&D tax relief.

Creators of computer games and programs apply to the Director of the National Tax Information with a request to issue an individual tax interpretation and determine whether the development of programs, games or applications meets the conditions for being recognized as research and development work, allowing for the settlement of the relief. 

Despite the negative interpretations of the tax office, which states that programming does not have the characteristics of scientific research and cannot be considered a creative activity because the activity of an IT specialist is not based on the application of "new knowledge", the courts grant such entrepreneurs the right to benefit from the tax relief. In the judgment of the Provincial Administrative Court in Gdańsk of October 3, 2023, file ref. no. I SA/Gd 521/23, the court ruled that the programmer's activity consisting in creating and improving computer programs meets the conditions to be considered research and development work. 

According to the court, what is important from the point of view of tax law is that thanks to the programmer's work, innovative possibilities of using programs are introduced, therefore their activity should be considered creative activity. A similar view was presented in the judgment of the Provincial Administrative Court in Gdańsk of September 5, 2023, file ref. no. I SA/Gd 568/23, in which the court emphasized that programming means the use of knowledge resources to create new applications, and the programs created do not have to have features of large-scale innovation to qualify as research and development activities. 

R&D relief for programmers – is it worth fighting the tax office in the event of an unfavorable interpretation? 

In the case of a preference such as the research and development relief, the situation of each taxpayer should be looked at individually – R&D activity has such a vague definition that often even small details may determine the possibility of applying the relief. 

It should be emphasized, however, that – as the example judgments cited above show – administrative courts take a taxpayer-friendly position. Therefore, receiving a negative interpretation does not necessarily mean the inability to benefit from preferences in the form of the possibility of deducting expenses related to research and development work. The potential benefits are usually material from the point of view of the entrepreneur's business, so in most cases it is worth challenging the tax office.