The exemption for research and development activity (R&D) is a solution provided directly by the provisions of law which allows deducting from the tax base the so-called qualified costs, i.e. tax deductible costs incurred by an entrepreneur for R&D activity. In practice, it comes down to “double” deduction of these costs (one time – as tax deductible costs – the second time – as a deduction of R&D expenses).
The application of the R&D exemption does not constitute tax avoidance or so-called aggressive tax optimisation, it is fully accepted by the tax authorities and the Ministry of Finance, as evidenced by a large number of favourable tax interpretations in this respect.
What is R&D activity?
It is a creative activity involving research or development, undertaken in a systematic way to increase knowledge and use knowledge resources to create new applications:
• R&D activity must be creative in nature – it is such activity that is aimed at creating new and original solutions,
• R&D activity has to be undertaken systematically – it is not possible to cover incidental activities with R&D exemption,
• R&D activity must have a specific purpose – it should be directed towards increasing knowledge resources or using existing knowledge to create new applications.
The addressees of the exemption for research and development activity are not the only entities with classic R&D departments. The relief may be used by any taxpayer who actually conducts research and development within the meaning of the regulations. The practice of tax authorities shows that the exemption can be successfully implemented in service or manufacturing companies operating practically in any industry.
Examples of eligible costs
1) remuneration of employees and on account of contracts of mandate and contracts for specific work in the part related to R&D activity
2) depreciation expenses on fixed assets and non-material and legal assets used in the conducted R&D activity, excluding passenger cars and structures, buildings and premises being separate property (with the reservation of R&D centres)
2) expenses on purchase of specialist equipment (other than fixed assets) and materials and raw materials directly related to the conducted R&D activity
3) expenses on expert opinions, opinions, advisory services and equivalent services provided or performed on the basis of a contract by a scientific entity, as well as purchase from such entity of results of scientific research conducted by it, for the needs of R&D activity
5) payable use of scientific and research equipment used exclusively in the conducted R&D activity, if such use does not result from an agreement concluded with a related entity (including use on the basis of lease agreements)
6) specific costs of obtaining and maintaining a patent, utility model right of protection or right of registration of the industrial design
Is this a good time to benefit from the exemption?
We believe that there is no better time to benefit from the R&D exemption than the current crisis situation. On our part, we provide a free analysis of the possibility of implementing the exemption in your company and an estimate of tax benefits. All we need to do is talk to you and analyse the existing documentation in your company.
Then we act comprehensively and take on the burden of most of the activities needed to implement the exemption. The result of the work is a specific tax benefit for your company – so necessary in times of recession.
The exemption can be implemented “on an ongoing basis”, but also for 2018 and 2019 (by correcting the tax return), which may mean tax refunds from the tax office!
As part of the cooperation:
a) we identify manifestations of R&D activity in your company;
b) we determine the costs of R&D activities and support you in determining these costs;
c) we prepare documentation justifying the entitlement to the R&D exemption and assist in the fulfilment of formal obligations in this respect;
d) we prepare drafts of changes in internal accounting documentation necessary to benefit from the R&D exemption;
e) we support you in introducing changes to the accounting and internal off-balance sheet documentation;
f) we prepare, in cooperation with your company’s accounting department, a calculation of the amount of the R&D exemption and support you in the appropriate demonstration of the R&D exemption in your annual statements;
g) we represent you before tax authorities, customs and tax authorities and administrative courts and defend the solutions we have implemented.