Research and Development (R&D) tax relief is one of the principal fiscal instruments designed to stimulate innovation in Poland. Properly implemented, it allows businesses to achieve material income tax savings.
The relief is not restricted to any industry. It is available to corporate and individual taxpayers conducting business activity, provided that their projects meet the statutory definition of research and development activity under the Polish Corporate Income Tax (CIT) and Personal Income Tax (PIT) Acts. Consequently, both manufacturing and service-oriented enterprises may benefit, irrespective of scale or sector.
Mechanism and statutory definition
For tax purposes, R&D activity is defined as creative activity involving scientific research or development work, carried out in a systematic manner with the objective of increasing knowledge resources and applying that knowledge to create new applications. The definition is structured and technical, and it contains three principal components.
First, scientific research may take the form of basic research or applied research. Basic research typically consists of theoretical or experimental work aimed at acquiring new knowledge about underlying phenomena without an immediate commercial objective. Applied research, by contrast, focuses on acquiring new knowledge and skills with a view to developing new or significantly improved products, processes, or services.
Second, development work encompasses activities involving the acquisition, combination, shaping, and use of current knowledge and skills for the purpose of designing and creating new, modified, or improved products, processes, or services. Routine and periodic changes, even if they result in certain improvements, are explicitly excluded.
In practical terms, the relief operates through a two-step mechanism. Qualifying R&D expenditure is first recognized as a standard tax-deductible cost. Subsequently, the same expenditure may be additionally deducted from the tax base within the limits specified by law. The enhanced deduction generally amounts to 100% of eligible costs, while certain categories, particularly employee remuneration related to R&D may benefit from a 200% deduction.
The relief is claimed in the annual tax return (CIT or PIT) together with a dedicated attachment listing qualifying costs. If the taxpayer incurs a loss or generates insufficient taxable income to fully utilize the deduction, the unused portion may be carried forward for up to six consecutive tax years.
An additional mechanism, commonly referred to as the “innovation employees’ relief,” allows taxpayers who could not fully benefit from the R&D deduction due to insufficient income to reduce monthly PIT advances withheld as an employer. In simplified terms, the employer may offset 19% of the unused R&D deduction against personal income tax advances remitted on behalf of employees who devote at least 50% of their working time in each month to R&D activities. This solution is particularly relevant for technology-driven businesses with substantial payroll costs.
Scope of qualifying activities
The availability of the relief is not contingent on industry classification. The decisive criterion is whether the activity meets the statutory characteristics: it must be creative, systematic, and directed at increasing knowledge or developing new applications.
Importantly, innovation is assessed from the perspective of the individual enterprise. A solution does not need to be novel at the global or even national level. It is sufficient that the activity introduces a new or significantly improved product, service, or process within the company’s own operations. For example, implementing a new production technology, enhancing product parameters, or developing a proprietary IT functionality may qualify, provided the work involves genuine creative and systematic effort.
There is no requirement that the project result in a patent, registered intellectual property right, or even commercial success. Unsuccessful projects may still constitute R&D if they meet the statutory criteria.
In the IT sector, typical examples include the development of proprietary software, creation of new application functionalities, work on cybersecurity solutions, design of new game mechanics, or development of new e-commerce modules. In manufacturing, qualifying activities may involve the design of new product formulations, optimization of production lines, testing of prototypes, or development of innovative materials.
Qualifying costs
The legislation provides a closed list of eligible costs. The most significant category in practice is personnel expenditure.
Employee remuneration and remuneration of contractors engaged in R&D may be deducted at 200% of the relevant portion attributable to R&D activities. The deductible base includes gross salary corresponding to the proportion of working time devoted to R&D, together with social security contributions financed by the employer.
Other categories of costs, generally deductible at 100%, include expenditure on materials and raw materials used in R&D projects, depreciation of fixed assets and intangible assets employed in R&D activities, and certain external services such as expert opinions, advisory services, and research services acquired from scientific institutions.
Implementation and compliance considerations
From a governance perspective, effective and defensible use of the R&D relief requires a structured implementation process. This generally includes identification and mapping of R&D projects, classification of activities against statutory criteria, determination of qualifying cost categories, and establishment of appropriate documentation procedures.
Companies frequently need to adapt internal systems, including time-tracking mechanisms for employees involved in R&D, accounting records segregating qualifying costs, and internal procedures linking specific projects to financial data. Proper documentation is essential in the event of a tax audit.
Conclusion
The Polish R&D tax relief is a structurally robust and potentially highly beneficial instrument for businesses investing in innovation. Its application is not confined to high-tech industries, nor does it require groundbreaking global inventions. The decisive factors are creativity, systematic execution, and a demonstrable objective of developing new or improved solutions within the enterprise.
When properly implemented, the relief can materially improve after-tax cash flow and support long-term competitiveness. However, its effective use depends on rigorous qualification of activities, disciplined cost allocation, and well-designed internal compliance procedures.
Agnieszka Sułkowska, Tax Advisor, Senior Associate, and Maksymilian Olejniczak, Advocate, Senior Associate contributed to this review.
