Recently, we have been dealing with several negative tax rulings regarding the question of whether I can apply IP Box relief as a programmer. The refusal was based on questioning the conduct of research and development activities. Currently, positive judgments regarding the right to use this relief by developers are beginning to appear, stating that they are indeed carrying out development work. Let’s consider how this entire situation should be understood.
Who can apply IP box relief?
The IP Box relief introduces a preferential 5% income tax rate on income from qualified intellectual property rights (Article 30ca section 1 of the PIT Act). Since the copyright to a computer program belongs to this category, IP Box has become an attractive solution for entities operating in the IT industry. However, having a qualified IP right is not the only condition for applying the IP Box.
We’ve already written about this:
The 5% tax rate applies to income obtained from intellectual property rights of which the taxpayer is the owner, co-owner, user, or has the right to use them under a license agreement and which are protected under applicable national or international law by, among others, a patent or a copyright to a computer program. These are the so-called qualified intellectual property rights / qualified IP.
We’ve already written about this:
Why the doubts of KIS and the Courts
Regarding the IP Box, in recent years, KIS has taken taxpayers on a rollercoaster ride. They’ve gone from willingly issuing positive interpretations to “forcing” taxpayers to admit that they meet the conditions for applying this relief, and finally to issuing negative interpretations. Some KIS branches were even sending 8-10-page requests for answers in which they asked the same questions several times (e.g., confirmation of meeting the conditions for research and development activity or obtaining specific types of income). In these cases, taxpayers should understand that KIS is not asking out of curiosity. We are dealing with shifting responsibility onto the taxpayer so that they effectively answer their own questions. One should be very cautious.
Can everyone apply the IP Box relief?
Interestingly, the IP Box regulation in Poland was introduced slightly differently than in other countries, specifically to benefit the IT industry (e.g., not having to carry out research and development work simultaneously). The relief is addressed to individuals performing research and development work (in the case of IT, more often development work), who earn income from the commercialization of copyrights (listed in Article 30ca of the PIT Act).
Even a cursory reading of the regulations or explanations by the Ministry of Finance issued in 2019 is enough to see that not every programmer can apply this relief. Not everyone produces a computer program (copyright to a computer program) in their activities, not everyone commercializes it properly (e.g., lack of a written form in the contract or lack of provisions on the transfer of these rights), and often the copyright remuneration is not separated from the total salary. Delving into the details of the services themselves, there is a large percentage of people who do not actually perform creative work but only certain routine activities (such as bug fixes or maintenance activities), which are difficult to qualify as innovative or knowledge-expanding. I am an ardent supporter of this relief, but for its safe implementation, one should be very well prepared and check everything beforehand.
What can we do?
In general, two years ago, there was a belief that everyone in the IT industry could apply the IP Box relief because they contribute to the development of a computer program. Currently, there is a belief that every programmer can use the IP Box and take advantage of the 5% tax rate. This is not true. Creative work aimed at creating and commercializing the copyright to a computer program is rewarded. So, the Director of KIS did not suddenly forbid programmers from using the IP Box but only clearly emphasized what everyone knows: not everyone can take advantage of this relief!
That is why it is extremely important to conduct a preliminary analysis of such cases and explain to programmers what research and development (R&D) work (here: development work) is about. It is no less important to actually check whether a given person qualifies in terms of content. Of course, this is more difficult than checking the contract or the costs included in the nexus indicator, but it should be the starting point. In other words, we should not sound the alarm in the case of such tax rulings because they are also needed. Thanks to such rulings, we can confidently answer that KIS looks at the merits of the case and issues a substantive “verdict” that has any power.
Can I apply IP Box relief – we publish
In the latest article, Gazeta Wyborcza published a comment by Piotr Sekulski, PhD, which clarifies these doubts. The article is available at this link.
tax advisor Piotr Sekulski, PhD
(…) Not everyone creates a computer program in their activities (the copyright to a computer program), not everyone properly commercializes it (e.g., lack of a written form in the contract or lack of provisions on the transfer of these rights). Often the copyright remuneration is not separated from the total remuneration. If we delve into the details of the services, then – although I rarely agree with KIS – there is a large percentage of people who do not actually perform creative work but only certain routine activities (such as fixing errors or maintenance), which are difficult to qualify as innovative or knowledge-expanding (R&D). I am a supporter of this relief, but it is necessary to prepare very well for its safe implementation.
If you have any questions about the IP Box relief, please contact us at www.outsourced.pl.
