Since the beginning of this year the amended Act on corporate income tax and the Act on personal income tax have become applicable. Apart from the amendments of the tax law which by now may be regarded traditional, also a new income tax rate related to the so-called qualified intellectual property rights was adopted in the amount of 5% of the tax base. Obviously, we mean the so-called Innovation Box or IP Box here.
As for Polish circumstances, a tax rate of 5% is very low. In particular in comparison with “standard” rates, which are a few times higher. Thus, it is beyond doubt that the mentioned amendment is favourable in terms of taxes and may cause activisation of a number of entities.
The amended acts indicate a few conditions which an entrepreneur has to meet in order to apply the preferential rate.
WHAT RIGHTS ARE COVERED BY THE IP BOX?
First of all, the rate applies to income from qualified intellectual property rights. The legislator enumerates these rights, which comprise:
1) a patent,
2) the right of protection for a utility model,
3) the right in registration of an industrial design,
4) the right in registration of a topography of integrated circuits,
5) an additional protection right for a patent related to a medicinal product or a plant protection product,
6) the right in registration of authorised medicinal and veterinary medicinal products,
7) the exclusive right referred to in the Act on the protection of plant varieties,
8) the copyright in a computer program.
It should be remarked here that the list covers rights where the object of protection has been created, developed or improved by a tax payer as part of his/her R&D activity!
WHAT INCOME MAY BE SUBJECT TO THE PREFERENTIAL RATE?
The amount of qualified income (or possible loss) on the relevant qualified right refers to the income obtained by the tax payer from several sources which are strictly connected with such right, namely:
– fees or receivables resulting from licence agreements related to the relevant right;
– a sale of such right;
– the sale price, if it includes such right;
– damages for violation of such right, if a litigation was initiated;
so generally speaking situations where the right brings profits for the entrepreneur.
The amount of income at issue is further modified by a special ratio calculated according to the formula: (a+b) x 1.3 / (a+b+c+d). By means of the formula we can indicate a certain value depending on the costs incurred by the entrepreneur (variables in the formula related to the costs incurred in connection with R&D works over the relevant right and the costs of acquisition of the qualified intellectual property right by the tax payer).
Mind the records!
Still you should remember about one thing – the amendment prescribes also some duties for the entity which would like to take advantage of the preferential rate. They are primarily limited to correct maintenance of accounting records – separation of qualified rights and associated costs, as well as making records which enable determination of the aggregate income on the qualified rights. If the entity fails to meet those requirements, it will have to pay tax at the standard rate.
In view of the foregoing we can state that the Innovation Box and the introduced amendments may contribute to increase of innovativeness of Polish economy and may trigger development of new technologies. Will it be so? Now, it all depends on entrepreneurs and the practice of tax authorities.
P.S. Do you want to learn more about the IP Box? Read our other articles on this topic: here and here.
