On November 23, 2018, Poland’s Ministry of Finance (MOF) issued a consultation document, seeking public comments on potential issues or suggestions in application of the patent box incentive regime signed into law on November 14th, via the 2019 Budget (Law No. 2860). Public comments are due by January 15, 2019.
On November 14, 2018, Poland’s President, Andrzej Duda, signed the 2019 Budget (Law No. 2860) into law. Article 2(28) of Law No. 2860 adds new Articles 24d and 24e to Poland’s Corporate Income Tax Act (Ustawa o Podatku Dochodowym od Osób Prawnych) (“CITA”) to introduce an innovation box incentive regime, with effect from January 1, 2019.
The innovation box incentive includes a preferential tax rate of 5% on qualified intellectual property (IP) income, where the taxpayer is the owner, co-owner, or user of IP rights under a license agreement. The 5% rate will apply only to IP rights that have been created, developed, or improved by the taxpayer with respect to the corresponding R&D.
“Qualified intellectual property rights” include the following:
- Additional protection rights for the invention.
- Protection law for utility model.
- Rights from registration of an industrial design.
- Rights from registration of integrated circuit topography.
- Additional right of protection on a patent for a medicinal product.
- Rights from registration of a medicinal and veterinary product authorized for marketing.
- Rights from registration of new plant varieties and animal breeds.
- Rights to a computer program (e.g., software).
A Polish taxpayer will qualify for tax relief under the innovation box if he purchases the qualified IP rights mentioned above, provided he then incurs costs related to the development or improvement of the IP. The income eligible for the innovation box will be derived from royalties or other charges related to the use of qualified IP rights, as well as income from the sale of qualified IP rights.
Under the innovation box incentive, taxpayers must keep detailed accounting records, which depict the calculation of the tax base, including incurred R&D costs that are associated with income from IP rights. The taxpayer can apply the tax relief throughout the period of legal protection of eligible IP rights.
The November 23rd consultation document says that the MOF intends to release guidance on application of the new patent box regime, which will incorporate feedback it receives from the public consultation. The consultation seeks public feedback on the following aspects of the patent box regime:
- The scope of covered IP.
- Rules for determining income from covered IP.
- How to determine the amount of income from the IP included in the selling price of the corresponding product or service.
- Registration and documentation requirements.
- Treatment of any IP losses.
- Tax obligations in case of withdrawal of the patent box application, or refusal by the Polish tax authority to grant the incentive.
- The possibility of applying a reduced rate by entities having qualified rights on the day of entry into force of the patent box provisions.
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