IP Box tax relief (a.k.a. Innovation Box or Patent Box) is a mechanism introduced in 2019 to support research and development activities. It enables preferential taxation at the rate of 5% on the portion of income from intellectual property rights that are subject to protection.
The tax relief is settled in the annual return, in which the amount of revenue subject to the preferential tax rate is indicated, but it can be used only in the calendar year following the one in which the activity started.
In addition, as of 2022, the Polish Deal has allowed companies conducting R&D activities to simultaneously use the IP Box tax relief and the R&D relief – i.e. to apply the so-called simultaneous IP Box tax relief.
The tax relief is aimed at entrepreneurs taxed under the tax scale, flat tax or corporate income tax.
To claim IP Box tax relief, a taxpayer must:
- carry out R&D activities;
- produce eligible IP.
Which IP rights are covered by the tax relief?
The intellectual property rights that are covered by the relief are indicated in Article 30ca(2) of the PIT Act and Article 24d(2) of the CIT Act. Pursuant to the Act, eligible IP includes:
- a patent;
- the right of protection for a utility model;
- the right of registration of an industrial design;
- supplementary protection right for a patent for a medicinal product or plant protection product;
- the right to register a topography of an integrated circuit;
- the right of registration of a medicinal product and a veterinary medicinal product authorised for marketing;
- the exclusive right referred to in the Act on Legal Protection of Plant Varieties;
- a copyright in a computer software.
The award of IP Box tax relief is conditional upon the fulfilment of the statutory requirements, while the validity of its application is confirmed, among other things, by obtaining a positive opinion of the tax authorities in an advance tax ruling.
Why is it worth taking advantage of?
The IP Box solution is designed to increase employment in the research sector and to stimulate investment in company research and development, as well as to increase companies’ awareness of IP rights as potential sources of income. Taking advantage of IP BOX tax relief is conditional upon keeping accounting records to indicate the link between income and expenses incurred to obtain eligible IP. This requires effort, but one should bear in mind that the preferential 5% taxation can be used as long as legal IP protection is in place.