On April 12, 2019, Poland’s Ministry of Finance (MOF) announced the beginning of a public consultation on proposed guidance on the new innovation box incentive regime introduced on November 14, 2018, via the 2019 Budget (Law No. 2860). Section 1.2 of the consultation document says that the guidance is to aid taxpayers in applying the Polish innovation box, since the rules are novel in Poland.
“A taxpayer may claim a right of [intellectual property] protection granted in another country, if protection [in Poland] … is guaranteed by ratified international agreements to which Poland is a party…”, according to Section 3.5 of the consultation document.
Section 4.2 of the consultation document covers the formula for calculating the amount of qualifying income subject to the innovation box preferential rate.
The MOF seeks comments on “…important practical and legal issues that may arise during the application of the new…” rules. Comments are due in writing by May 10, 2019.
Background
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:
- Patents.
- 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 or she purchases the qualified IP rights mentioned above, provided he or she 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 Polish 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.
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