Aimed at increasing the attractiveness of R&D activity in Poland, the IP “Innovation” Box is a preferential tax rate of qualified income offered to programmers, allowing IT specialists to reduce their income tax burden from 19% to 5%. It sounds appealing, don’t you think? Find out here what conditions you have to meet in order to avail of this opportunity.

Programmers running a sole proprietorship with a research and development profile from January 1, 2019 can avail of a lower income tax band under the IP Box relief. The new form of taxation a response on the part of the Polish government to the needs of IT entrepreneurs.

Increasing the competitiveness of software houses

The introduction of a new tax relief offers an opportunity to reduce taxes and is perceived as one of the main criteria for selecting a future employer. Previously, Polish companies have competed for talent with companies from Western Europe; and it was never a level playing field. Software houses from Western Europe operated on attractive terms and were able to offer higher salaries to IT contractors from Poland. Since the introduction of IP Box in Poland, the wage competitiveness of Polish software houses has increased, and IT specialists are now opting to work for companies with Polish capital.

The IP Box and IT recruitment

The tax preference in the form of the IP Box relief came into force on January 1, 2019. The assumption of the project was to lower the payable the tax rate to 5% for income obtained from qualified intellectual property rights as part of R&D activities. The relief is available to natural persons paying PIT tax and private persons submitting a CIT tax return. In addition, interested parties are required to run a business that transfers rights or licenses written software, and keeps detailed records.

The tax preference in the form of the IP Box relief came into force on January 1, 2019. The assumption of the project was to lower the payable the tax rate to 5% for income obtained from qualified intellectual property rights as part of R&D activities. The relief is available to natural persons paying PIT tax and private persons submitting a CIT tax return. In addition, interested parties are required to run a business that transfers rights or licenses written software, and keeps detailed records. The IP Box tax relief could already be used in 2020 by settling costs for 2019. Currently, questions about the IP Box are featuring more and more in recruitment processes. - comments Julian Pigoń, Senior Account Manager of the IT Outsourcing recruitment team at Devire.

Who can avail of the IP Box tax rate?

Programmers who create new operating systems, build new algorithms or use innovative technologies may seek this relief. Unfortunately, not everyone can avail of the IP Box. Professionals dealing with routine activities do not qualify for the more favourable tax rate. Therefore, before applying to the Director of the National Tax Information for an individual interpretation, one must ask oneself whether the work actually performed is systematic and is related to the conducting of research and the creation of new solutions.

In order to be able to avail of the relief, clearly defined rules must be followed, which must also be confirmed by way of a contract - and this is the most common enquiry. The relief allows you to account for profits from research and development projects; that are based on intellectual property rights, and the concluded contract must strictly define the subject of copyright and the attendant spheres of activity - adds Julian Pigoń.

Opinions on the interpretation vary. Some believe that it is worth applying for, whereas for others the entire process seems superfluous and time-consuming. Devire specialists recommend that contactors make their applications get an official position from the Tax Office. In the event of a tax audit, this interpretation with a well-described actual state of the business activity will enable the IT contractor to settle the tax without any problems.

Is the IP Box only for IT contractors?

The IP Box represents real benefits both contractors and software houses. For IT contractors who meet the conditions, the IP Box is a chance to achieve higher earnings. Software houses that develop and sell previously purchased software may also benefit from this preferential taxation method. In both cases, the way in which the agreement between the interested parties is formulated is important. Because the contract must clearly state what the entity is and whether this entity qualifies for preferential taxation.

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