On October 16, 2015, the President of Poland signed Amendments to Certain Acts Related to Supporting Innovation Act of September 25, 2015. We devoted one of our previous alerts to this amendment bill. However, the final wording of the Act differs materially from the regulations proposed in the original bill and, among other things, provides for more stringent criteria of using the available incentives and narrows their scope.
The purpose of the Act is to support innovation in the economy creating fiscal incentives to invest in R&D and removing a number of significant legal barriers encountered by Polish scientific institutions and businesses.
In terms of tax incentives the Act provides for, among others:
- A new tax relief, enabling taxpayers to deduct from the taxable base certain qualified expenditures incurred for R&D activities. The Act contains a closed list of such expenditures, which should also qualify as tax-deductible costs under the general tax rules. Deduction may be made up to a certain limit depending on the type of cost and/or type of taxpayer, namely:
- For employment costs: up to 30%, regardless of the taxpayer status.
- For other qualified expenditures: up to 20% for small and medium enterprises, and up to 10% for large enterprise.
- Qualified expenditures ought to be deducted in the year in which they were incurred, and if the taxpayer does not generate sufficient income or incurs a loss in this particular year, in the period of three consecutive fiscal years directly following the aforesaid year.
- Deferred taxation of non-monetary contributions in the form of commercialized intellectual property (except software copyrights) contributed in 2016 or 2017 by a commercializing entity until the time the shares received in this way are sold. The currently effective, less advantageous regulations, providing for deferred taxation of such contributions for no more than 5 years from the day the shares received in this way were received, will no longer apply with respect to the above.
The Act seeks to support the venture capital sector by introducing a definition of the venture capital company (Polish: spółka podwyższonego ryzyka) which, if it meets certain requirements, will be exempt from income tax on the disposal of shares held in R&D companies, on condition that the shares are acquired in 2016 or 2017.
In a related move, the tax relief connected with acquisition of new technologies will be repealed, with the proviso that the rights acquired by the end of the taxpayer’s fiscal year commenced before January 1, 2016 will be maintained.
The Act also amends a number of Acts so as to, among others, facilitate the disposal of assets by universities, research institutions, the Polish Academy of Science and its science institutes and facilitate the employment of young scientists and foreign specialists in research institutions and universities. Importantly, the Act also increases the National Capital Fund’s ability to support R&D, including within EU funding programmes.
The Act will come into force on January 1, 2016. Due to time constraints (2016-2017) for taking certain tax preferential activities (such as the contribution of intellectual property or acquisition of shares by venture capital companies), we suggest considering at your earliest opportunity whether the solutions introduced in the Act may benefit your business.
The Act is part of other legislative efforts taken recently to improve conditions for R&D activities (such as, e.g. the introduction of a new version of a credit facility extended by BGK for small and medium-sized enterprises for the purpose of technological innovations). Moreover, we encourage entrepreneurs to research the possibilities of receiving EU funding from subsidies already launched or about to be launched. In doing this, new EU regulations on state aid in the R&D sector, which took effect last year, also need to be taken into account.