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IP Box tax relief has been in place since early 2019, offering an option to tax part of the income at a preferential rate of 5%, more attractive than standard rates provided for in the CIT and PIT Act.
Therefore, it is a way to significantly reduce the amount of income tax you pay, and the money saved on tax can be used for any purpose whatsoever.
The IP Box tax relief can be implemented in most entities operating in the IT industry. It can be claimed by any entity that pursues research and development activities whereby they create or creatively develop a copyright to a computer program, thus generating income subject to CIT or PIT.
A copyright to a computer program does not necessarily have to be produced by the taxpayer. In certain cases, the IP Box tax relief can also be claimed by entities that e.g. use an eligible right on the basis of an exclusive licence and carry out R&D works commissioned by a third party.
Opting for the IP Box solution does not mean you have to file separate applications (as in the case with subsidies), and the taxpayer claims the tax relief in their annual CIT or PIT return.
The Act provides a catalogue of eligible intellectual property rights that may be covered by the tax relief. What is important for the IT industry is that a copyright to a computer program is explicitly listed by the legislator as one of such eligible intellectual property rights. A precondition for claiming the IP Box tax relief is that this right shall enjoy legal protection either under Polish or foreign regulations.
Under the Act, the catalogue of income that may be taxed at a preferential rate includes the following:
- receivables from computer program licensing;
- receivables from the sale of a copyright to a computer program;
- receivables from the sale of products or services, provided that a copyright to a computer program is included in the sale price;
- compensation for the infringement of rights to computer programs.
The 5% preferential rate does not apply to all income derived from an eligible right. In order to determine what part of the income qualifies for the IP Box tax relief, taxpayers must calculate the Nexus index. This indicator allows to determine what part of R&D activities related to an eligible right has been undertaken by the taxpayer on their own (by their employees and unrelated associates), and what part has been purchased from other entities. The more work the taxpayer does on their own, the more can they benefit from the tax relief.
In order to claim the tax relief safely, it is also necessary to recognise eligible rights in the taxpayer’s accounts properly and obtain documentation related both to these rights and the research and development activities that are being carried out. This is something entrepreneurs should pay particular attention to.
See what we can do for you
Rely on expert support when implementing IP Box
RSM Poland consultants have practical experience in consultancy on IP Box tax relief in the IT industry. Therefore, we can offer entrepreneurs our comprehensive support adjusted to their needs, where we can among others:
- identify activities that meet the definition of R&D activities;
- identify eligible rights that may be covered by the IP Box tax relief;
- verify the records and documentation maintained by the taxpayer for the purposes of the IP Box tax relief and help to complete it;
- file a request for an individual interpretation of tax regulations in order to make sure that the tax relief is implemented as safely as possible;
- prepare reporting and identify possible risk areas.
Recover part of your expenditure on innovation through implementing the IP Box solution. Rely on the expertise and experience of RSM Poland experts who will help you claim the tax relief safely and effectively.
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