“Total working time” in R&D tax relief – how should it understood?

Eligible costs under the research and development (R&D) tax relief include, among others, expenses incurred on the remuneration of employees performing R&D activities. These expenses may be deducted to the extent that the time devoted to R&D activities remains in proportion to the employee’s total working time in a given month.

Moreover, the concept of “total working time” is also relevant in the context of applying the tax relief for innovative employees. This concerns the fulfilment of the condition under which the employee’s working time devoted to R&D activities should amount to at least 50% of the total working time in a given month.

The latest case law of administrative courts indicates that “total working time” should include not only the time actually spent working, but also periods of absence, such as holidays or sick leave, during which the employee does not perform work but remains at the employer’s disposal.

Implications for taxpayers benefiting from the R&D tax relief

If periods of absence are included in total working time, the time devoted by an employee to R&D activities may be proportionally lower. This results in a reduced amount of deductible eligible costs compared to the alternative interpretation of “total working time,” understood solely as the time actually worked.

A shift in case law

Pursuant to Article 128 § 1 of the Polish Labour Code, working time is the time during which the employee remains at the employer’s disposal at the workplace or another place designated by the employer for the performance of work. Accordingly, both holiday leave and sick leave were not considered components of “total working time” (inter alia, the Supreme Administrative Court (SAC) judgments of 9 July 2024, II FSK 1313/21; 21 March 2023, II FSK 2275/20; and 11 January 2022, II FSK 1247/21).

However, the SAC itself has not been consistent in this respect. In its judgment of 8 February 2023 (II FSK 1537/20), the court stated that attempting to explain the disputed term by referring to labour law provisions constitutes an excessive simplification, since tax regulations refer to “total working time” rather than “working time.” According to the SAC, the former concept also includes periods of employee absence.

Nominal time versus actual time

The most recent confirmation of this broader interpretation of the disputed term can be found in the judgment of the Voivodeship Administrative Court (VAC) in Warsaw of 18 December 2025 (III SA/Wa 1870/25) and the judgment of the VAC in Wrocław of 11 December 2025 (I SA/Wr 473/25) (verbal justifications).

In both cases, the key issue was whether holiday leave, sick leave, or other justified absences should be included in “total working time” for the purpose of settling the tax relief for innovative employees.

The courts dismissed the taxpayers’ complaints and uniformly held that “total working time” does not refer exclusively to the actual working time devoted to specific tasks. In the opinion of the adjudicating panels, explaining the term used in Article 18db(3)(1) of the Corporate Income Tax Act by referring solely to Article 128 § 1 of the Labour Code is not appropriate, because the tax provision refers to “total working time,” not “working time.” Since the legislator did not choose to use the concept of “working time” as defined in Article 128 § 1 of the Labour Code, but instead used a different term, this indicates that the intention was not to refer to “working time” within the meaning of labour law, but to a different legal category. Consequently, the concept of “total working time” should be understood as covering the employee’s standard working time, in particular without excluding periods of justified absence.

Summary

Taxpayers settling the R&D tax relief or planning to apply for the so-called relief for innovative employees should review the approach they use to calculate the discussed proportion. It may also be worth verifying settlements for previous tax years.

At MDDP, we assist with the settlement of this and other tax reliefs—from verifying eligibility potential to preparing documentation and declaring reliefs in tax returns. We would be happy to share our experience.