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Poland: Poland introduces new R&D tax incentives

Dziedzic

Monika Marta Dziedzic

From January 1 2016, Polish tax resident companies can make an extra deduction from their tax base for expenditure incurred on research and development (R&D).

R&D is defined as the creative activity including scientific studies or development works, carried out systematically to increase the resources of knowledge and use of knowledge resources to create new applications. The regulations also provide definitions of scientific studies (basic research, applied research, industrial research) and development works.

The new R&D tax relief provides a reduction of the tax base by:

  • 30% of wages and social contributions of employees employed to carry out research and development (irrespective of the size of the company); and

  • 10% or 20% in the case of:

    • purchase of commodities and raw materials;

    • expert opinions, research and similar activities;

    • payments for use of research equipment; and

    • depreciation of intangible assets and fixed assets, excluding passenger cars, buildings and constructions.

Micro-enterprises or small and medium-sized enterprises are entitled to a deduction of 20%. Larger entities are entitled to a deduction of 10% of expenditure.

R&D tax relief is available to taxpayers who:

  • incur non-refundable R&D qualified costs;

  • did not carry out business activity within a special economic zone in a given tax year;

  • identify R&D costs in records kept for income tax purposes; and

  • have concluded an agreement with a scientific unit (this requirement refers to expenditure incurred on basic research defined as original research, experimental or theoretical works, undertaken mainly to acquire new knowledge without any direct commercial application or use in view.

Deductions shall be made in a tax return in relation to the tax year in which the qualified costs were incurred. If the taxpayer suffers a tax loss or if the taxpayer's income is lower than the amount of allowed deduction, then deductions – in the entire amount or in the remaining part – can be made in tax returns in relation to three tax years immediately following the year in which the taxpayer took or will be able to take the deduction.

New regulations also introduce a totally new concept for Poland. A capital gain on the disposal of the qualifying minimum 10% participation held for a minimum two years in a defined R&D company may be exempt from corporate profits tax. The shares must be acquired in 2016 or 2017. The exemption applies to corporations and limited partnerships which invest at least 75% of their assets in defined financial instruments. Despite some limitations, this is possibly a sign of a broader participation exemption in Poland.

Monika Marta Dziedzic (monika.dziedzic@mddp.pl)

MDDP, Poland

Tel: +48 22 322 68 88

Website: www.mddp.pl

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