On January 1, 2019 new tax regulations come in force in Poland. New law imposes a number of changes in income taxe, including introduction of a new mechanism allowing a significant reduction in taxation of income derived from intellectual property rights - Innovation Box. The new regulations are part of the implementation of the "Plan for Responsible Development" and "Strategy for scientific excellence, modern higher education, partnership with business and social responsibility of science" in the area of innovation.
Innovation Box is the solution which aims to stimulate innovation in Poland. Its aim is to increase interest in research and development works carried out and commercialize them in Poland. This new solution is also an important initiative that makes the tax system competitive and attractive for high technology companies. Moreover it supports development and investments of innovation sectors.
The main requirement for using the preferential tax rate is running research and development activity related to the development, creation or improvement of the intellectual property. The research and development works is defined as creative activity involving research or development work, undertaken in a systematic manner to increase knowledge resources and use of knowledge resources to create new applications. The research or development works must be creative and innovative. The routine, irregular or periodic actions maintaining the staus quo in offering goods or services shall not be treated as research and development works.
In order to benefit from Innovation Box, the solution must be protected by one of the rights listed in the catalogue of rights. Pursuant to the regulation, new tax relief may be used for: patent; SPC; protection right for a utility model; right in registration of an industrial design; right in registration of topography of integrated circuit; a medicinal and veterinary product admitted to trade; new varieties of plants and animals; the right to a computer program. The tax preferences may be used until the right expires, for example in the case of a patent for 20 years. Innovation Box may be also used for the industrial property right applications. In case of withdrawn or dismissing of the application, the taxpayer will be obliged to tax the qualified income from intellectual property rights obtained for the period from the day of filing the application until the day of withdrawal of the application or refusal of protection right on general terms.
Thanks to the Innovation Box, taxation level of income from intellectual property rights is lowered to 5%. The essence of the relief is the possibility of deducting certain expenses from the tax base, which were previously the tax-deductible costs incurred by the taxpayer for research and development activities. The deduction amount may not exceed the amount of income obtained by the taxpayer from income other than income from capital gains during the tax year. The income eligible for the Innovation Box is income derived from royalties or other charges related to the use of intellectual property rights, income from the sale of intellectual property rights, and income from intellectual property asset included in the sale price or services based on the market price. The reduced rate is applied to an adjusted taxable base calculated in a way specified in the act.
The condition of taking advantage of the Innovation Box is the separation of income from intellectual property commercialization in the account books. Each qualified intellectual property right shall be separated in account books. The account books shall be run in such manner that it is possible to determine of revenues, tax deductible costs and income (loss) for each qualified intellectual property right. All costs that are necessary to calculate the indicator for each qualified intellectual property right.
Innovation Box has been implemented and operates in many other countries, including the Netherlands, Great Britain, Ireland, Luxembourg, Slovakia, France and Hungary. It is known under various names, as Patent Box, Intellectual Property Box, IP Box or Knowledge Development Box. Usually relief mechanisms consist in taxing income from intellectual property rights with a reduced tax rate or exempting some of this income from taxation.
The new solution shall increase the attractiveness of conducting research and development activities in Poland by Polish and foreign enterprises, change the economic model for a knowledge-based economy, and increase awareness of intellectual property rights as potential sources of income. Innovation Box will constitute an important support for innovative activities in Poland.