Tax relief for research and development was introduced at the beginning of 2016. Since 2018, it has been specifically advantageous to businesses being CIT and PIT payers. Starting from January 2022, taxpayers may combine two measures, i.e. R&D relief and IP box, which has never been possible before.
1. Who can apply for R&D tax relief?
Contrary to common belief, R&D relief may be used by almost every business, no matter what the industry is, since research and development activity should be understood as working on new products and enhancements to existing processes or products. There is no need to cooperate with research and development institutes or engage any research units.
To claim such relief, a business needs to undertake research and development activities, regardless of the result. The level of innovation may depend on a given business – it will suffice to introduce changes or improvements to a product or service.
R&D relief entitles eligible taxpayers to deduct from the taxable base qualifying expenditure on R&D that has been already classified as deductible as a revenue expense of the trade for tax purposes.
2. What should I do to be eligible for R&D relief?
To claim relief a taxpayer needs to:
carry out R&D activities;
indicate projects involving R&D activities; and
attribute qualifying expenditure incurred on those R&D activities to a specific form of tax relief.
3. What qualifies for R&D relief?
Qualifying expenditure include specifically:
staffing costs proportional to the time dedicated to R&D undertaken by the company;
the purchase of materials and raw materials directly related to R&D activity;
depreciation write-offs made in the tax year on fixed assets and intangible assets used in the conducted R&D activity;
the costs of obtaining and maintaining a patent, protection right for a utility model, rights from registering an industrial design; and
the purchase of services consisting in the use of scientific and research equipment.
R&D relief cannot be claimed for the costs of depreciation of passenger cars as well as buildings, structures and premises.
Taking advantage of R&D relief requires additional administrative work, including: separate accounts for the purposes of R&D relief, obtaining a tax ruling to guarantee the tax safety of the business, introducing time tracking (timesheet) for employees and contractors to document the time actually spent for R&D activities.
All of those efforts will undoubtedly pay off, since tax benefits are very attractive and are worth it. Please also note that you can claim R&D relief up to five years back, therefore you may correct your tax declarations from the past years to generate more savings.