Is the fact that a project is innovative or technologically advanced sufficient to claim the Polish R&D tax relief? No. A taxpayer must also demonstrate that the work actually meets the statutory criteria for research and development activity. This is why R&D relief documentation is so important.
Prawo.pl has published an article entitled “Korzystanie z ulgi B+R wymaga silnych argumentów”, written by Monika Fedorczyk from Outsourced.pl.
The author examines the current approach of the Polish tax authorities and administrative courts to the R&D tax relief. She explains that the name of a project, its high level of technical sophistication or the fact that a solution was developed for an individual client do not, in themselves, determine eligibility for the relief.
R&D relief documentation must describe the actual work performed
A taxpayer should be able to identify the research or technological problem addressed by the project, the difficulties and uncertainties encountered during the work, and how the project increased the available knowledge or led to the development of new applications.
As Monika Fedorczyk emphasises:
“Before claiming the relief, the taxpayer should prepare project documentation, describe the research and technological problem and identify the uncertainties…”
It is therefore insufficient to describe a project generally as innovative or merely repeat the statutory definition of research and development activity. R&D relief documentation should demonstrate how the relevant legal criteria were met by the specific activities, problems and results of each project.
R&D relief documentation and routine improvements
One of the most important challenges is distinguishing genuine research and development activity from ordinary design, optimisation, implementation or product and process development. Not every improvement will automatically qualify as R&D activity.
Monika points out that:
“The tax authorities distinguish routine improvements, standard optimisation and implementation activities from genuine development work…”
The final result of a project is therefore not the only relevant factor. Every taxpayer should also demonstrate that the work was creative and systematic and provide convincing arguments that it went beyond the standard adaptation or improvement of existing solutions.
Why is R&D relief documentation important in practice?
During a tax audit, it is the taxpayer who must convincingly explain why particular projects and the related expenses were included in the R&D tax relief. R&D relief documentation should make it possible to reconstruct the course of the work, identify the people involved, establish the results achieved and correctly allocate eligible costs.
For this reason, the documentation should be prepared on an ongoing basis—not only after the project has ended or once the tax authority starts asking questions.
How can we help?
At Outsourced.pl, we help businesses determine whether their projects meet the requirements for research and development activity. We also assist with identifying eligible costs, preparing R&D relief documentation, organising the necessary records and assessing the tax risks associated with claiming the relief.
