On June 13, 2018, Poland’s Ministry of Finance (MOF) issued a press release on corporate tax amendments, including an “innovation box” proposal. See BEPS Action 5. Currently, Poland does not have a patent box regime.
According to the press release, the proposal will increase employment in the research and development (R&D) field, and increase companies’ awareness of intellectual property (IP) rights as potential sources of income. The MOF assumes that the proposal will lead to an increase in the number of patent applications by Polish entities.
The innovation box regime would be based on preferential taxation (e.g., reduced tax rate) of qualified income, separated from the taxpayer’s total income, obtained from IP components protected by, among others, a patent, protection right for a utility design, the right from registration of an industrial design, or copyright law. To qualify for the reduced tax rate under the regime, taxpayers must conduct R&D activities related to the creation, development, or improvement of an IP component.
According to the BEPS Action 5 final report, countries have agreed to strengthen the substantial activity requirement used to assess preferential regimes in order to realign taxation of profits with the substantial activities that generate them. They agreed to use the “nexus approach” for IP regimes. This approach allows a taxpayer to benefit from an IP regime only to the extent that the taxpayer itself incurred qualifying R&D expenditures that gave rise to the IP income.
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