How to Effectively Deduct Research and Development Costs

A Practical Guide for Entrepreneurs and Foreign Investors | ATL Law 2026

The Strategic Value of the R&D Tax Relief

The research and development tax relief, commonly referred to as the R&D relief, stands as one of the most valuable tax optimisation instruments available under Polish law. Its mechanism allows taxpayers – both corporate income tax (CIT) payers and individual entrepreneurs subject to personal income tax (PIT) – to deduct qualifying costs of research and development activities a second time, directly from the tax base. In practice, this creates the possibility of effectively doubling the tax value of innovation expenditure, and in the case of entities holding the status of a research and development centre, the effective deduction may reach or even exceed one hundred percent of costs incurred.

From the perspective of foreign investors considering Poland as a location for innovation-driven activities, the R&D relief constitutes a genuine competitive advantage. The Polish tax framework, built on the foundations of Article 18d of the CIT Act and Article 26e of the PIT Act, positions Poland among the more generous jurisdictions within the European Union. At the same time, the complexity of documentation requirements, the precise statutory definition of qualifying activities, and the tax risk associated with incorrect classification of expenditure mean that effective implementation of the relief demands careful legal analysis and a strategic approach to tax planning.

This article provides a comprehensive overview of the legal and practical aspects of the R&D relief under the regulatory framework applicable in 2026, with particular attention paid to the perspective of foreign entities conducting or considering innovation activities on Polish territory.

Defining Research and Development Activities Under Tax Law

The foundational challenge in implementing the R&D relief is correctly identifying whether the activities conducted by a taxpayer meet the statutory definition of research and development. Both the CIT Act and the PIT Act refer in this regard to the Act of 20 July 2018 on Higher Education and Science, defining R&D activities as creative work encompassing scientific research or development work, undertaken in a systematic manner with the aim of increasing the stock of knowledge and using that stock of knowledge to create new applications.

Scientific Research – Scope of the Concept

Polish regulations distinguish between two types of scientific research relevant to the R&D relief. Basic research covers empirical or theoretical work conducted primarily to acquire new knowledge about the foundations of phenomena and observable facts, without any direct commercial application in view. Considerably more common in business practice is the second type – applied research, comprising work aimed at acquiring new knowledge and skills, oriented towards developing new products, processes or services, or introducing significant improvements to existing ones.

Tax authorities and administrative courts consistently emphasise that the novelty of a technological solution is assessed relative to the knowledge already possessed by the taxpayer, not on a global scale. This means that even implementing a solution already existing on the market, provided it is new to a given enterprise and requires the company to conduct its own research, may qualify as research and development activity. The jurisprudence of the Supreme Administrative Court confirms this liberal interpretation, which materially broadens the circle of potential relief beneficiaries.

Development Work – Specifics of Classification

Development work encompasses activities involving the acquisition, combination, shaping and utilisation of currently available knowledge and skills – including in the field of IT tools and software – for the purposes of production planning and the design and creation of modified, improved or new products, processes or services, with the express exclusion of activities consisting of routine and periodic changes to such products, processes or services, even where those changes constitute improvements.

The exclusion concerning routine and periodic changes carries substantial practical significance. Tax authorities frequently challenge the eligibility of work consisting of standard maintenance of IT systems, software updates required by regulatory mandates, or service activities performed according to repeatable procedures. The boundary between work of a routine character and research and development activity can be difficult to draw with precision, requiring case-by-case analysis that takes into account the full factual circumstances of each individual project.

For entities in the IT sector, which represent a significant segment of relief beneficiaries, the critical distinction lies between creating new software or functionality and maintaining existing systems. Software development that involves solving technological problems for which no ready-made solution exists and requires the company to conduct its own conceptual and implementation work generally qualifies for the relief. By contrast, handling service requests, installing vendor-supplied updates, or migrating data according to established procedures falls outside its scope.

The Requirements of Creativity and Systematic Conduct

The statutory definition of R&D activity contains two qualitative conditions whose fulfilment is necessary for activity to be recognised as qualifying. The first – creativity – means that the work conducted must have an original and non-repetitive character, constituting the product of the intellectual effort of its authors. This condition is interpreted broadly and does not require the work to result in an invention or other protected intellectual property right; it is sufficient that the activities go beyond the reproductive reproduction of known patterns.

The requirement of systematic conduct means, in turn, that research and development activity must be carried out in an organised, planned and continuous manner, rather than as a one-off, incidental undertaking. In practice, this necessitates the existence of documented project management processes, work schedules, allocated human and material resources, and progress monitoring mechanisms. The absence of adequate organisational documentation is one of the most frequent grounds on which tax authorities challenge the right to the relief during tax audits.

Qualifying Costs – Scope and Limitations

The essence of the R&D relief lies in the ability to deduct qualifying costs from the tax base a second time, after they have already been recognised as tax-deductible expenditure. The catalogue of qualifying costs is exhaustive in nature, meaning that only expenditure expressly enumerated in Article 18d of the CIT Act or Article 26e of the PIT Act is eligible for deduction, regardless of how closely any given cost is connected with the R&D activities carried out.

Employment Costs and Remuneration

The most significant category of qualifying costs comprises amounts payable under the heads listed in Article 12(1) of the PIT Act, paid to employees engaged in research and development activities, together with social security contributions financed by the employer. Qualifying costs include basic salaries, bonuses, overtime pay and other components of remuneration, provided their payment is linked to the performance of R&D tasks.

The legislation clearly provides that the qualifying portion of remuneration is limited to the part corresponding to the time actually devoted by an employee to research and development activity as a proportion of their total working time in a given month. In practice, this requires the maintenance of time records for employees engaged in R&D projects, broken down between activities related to R&D and other professional duties. Such records should take a form that allows verification by tax authorities and should form an integral part of the documentation supporting the right to deduction.

A separate matter concerns the treatment of remuneration paid to individuals engaged under civil law contracts – contracts of mandate or contracts for specific work. The legislation expressly permits such amounts, together with associated social security contributions, to be recognised as qualifying costs, but only in respect of natural persons who directly carry out R&D activities. By contrast, remuneration paid to entities conducting business activity – including self-employed persons operating under so-called B2B arrangements – does not constitute a qualifying cost.

Materials and Raw Materials Directly Related to R&D

The costs of acquiring materials and raw materials directly related to the research and development activities conducted represent the second significant category of qualifying costs. The condition of a direct link to R&D requires that the relevant materials or raw materials be actually consumed in the course of R&D work, rather than merely providing indirect support for its conduct. Tax authorities verify compliance with this condition by examining technical project documentation, warehouse records and material consumption protocols.

Within this category one may also identify the costs of acquiring specialised equipment that does not constitute a fixed asset, used directly in R&D activities. An important qualification applies to equipment that does constitute a fixed asset – in that case, the qualifying cost is represented solely by depreciation charges, but only to the extent that the fixed asset in question is actually used in research and development activities. The proportionate allocation of depreciation charges to R&D requires the development and consistent application of an adopted allocation key, which must be appropriately documented.

Expert Opinions, Advisory Services and Research

The costs of obtaining expert opinions, advisory services and equivalent services, as well as the results of scientific research, provided or carried out under a contract by a scientific entity, constitute a further category of qualifying costs. The critical restriction within this category is that the service provider must be a scientific entity within the meaning of the Higher Education and Science Act – meaning a university, research institute, institute of the Polish Academy of Sciences, or the Łukasiewicz Centre or an institute operating within it. The costs of equivalent services obtained from commercial entities do not as a rule qualify for deduction, which represents a significant limitation for enterprises collaborating with external technology partners operating in the form of commercial law companies.

Depreciation of Research Equipment and Intangible Assets

Taxpayers may include among qualifying costs depreciation charges on fixed assets and intangible assets used in the R&D activities conducted, with the exception of passenger cars and structures, buildings and premises constituting separate ownership. In relation to intangible assets – including in particular intellectual property rights – the deduction of depreciation costs is of fundamental importance for technology-sector entities investing in patent protection or in licences for technologies used in their R&D activities.

It is worth noting that in the case of scientific and research equipment, full depreciation charges may be included without any obligation to proportionally limit them to the portion used in R&D, provided the equipment is wholly dedicated to that activity. In practice, this requires a precise determination of the actual scope of use of specific assets and appropriate documentation of that fact.

Qualifying Costs and Special Economic Zone Activity

The legislation expressly excludes from the R&D deduction those qualifying costs that have already been deducted from the tax base by the taxpayer or have been reimbursed to the taxpayer in any form. This applies in particular where a taxpayer simultaneously avails of both the R&D relief and the IP Box preference in relation to the same costs, although the legislation does provide a mechanism for the complementary application of both preferences. Similarly, costs financed by state aid or grants cannot be included in the R&D deduction to the extent they have been covered by external funding.

Particular attention must be paid to entrepreneurs conducting activities in special economic zones or on the basis of support decisions issued under the Polish Investment Zone scheme. Costs attributable to activity covered by a zone exemption or an exemption under a support decision cannot constitute qualifying R&D costs to the extent they relate to income exempted from taxation. Entities benefiting from multi-layered tax preferences must therefore implement precise cost segregation and revenue allocation mechanisms to preserve their entitlement to the R&D relief in respect of activities that remain subject to taxation.

Deduction Amounts and the R&D Centre Regime

The general rules of the R&D relief allow a deduction from the tax base of one hundred percent of qualifying costs incurred. This means that a taxpayer who has incurred qualifying costs, recognised them as tax-deductible expenditure (thereby reducing taxable income), is entitled to an additional deduction of the same amount from the tax base, effectively doubling the tax value of those expenditures.

The legislature has provided enhanced deduction limits for taxpayers holding the status of a research and development centre, granted under the Act of 30 May 2008 on Certain Forms of Support for Innovative Activities. R&D centres are entitled to deduct one hundred and fifty percent of qualifying costs, and in relation to employment costs this limit rises to two hundred percent. In practice, this means that every zloty of qualifying employment expenditure actually incurred generates an additional tax deduction equal to a second zloty, which at a CIT rate of nine or nineteen percent translates into a real reduction of the tax liability.

Where the value of qualifying costs exceeds the income earned by the taxpayer in a given tax year, the right to deduction is not forfeited. The unused portion may be carried forward and deducted over the following six tax years immediately succeeding the year in which the taxpayer utilised or was entitled to utilise the deduction. This provision is of particular importance for entities in the phase of intensive R&D investment preceding the commercialisation of research results, which often report losses or low income in their early years of operation.

Documentation Obligations – The Foundation of Safe Relief Application

The correct application of the R&D relief requires the maintenance of documentation at three levels: strategic, operational, and financial-tax. Only the cumulative fulfilment of requirements at all three levels provides the taxpayer with full tax security in the event of a potential audit.

Documentation of Research and Development Activity

At the strategic level, the taxpayer should hold documents confirming that the activities carried out meet the statutory definition of research and development activity. In practice, such documentation typically encompasses descriptions of R&D projects containing a justification of their innovative character, identification of the research or technological problem the project is intended to solve, a description of the research methodology employed, and the aim and scope of the planned work. These documents should be prepared on an ongoing basis rather than retrospectively, as their credibility is assessed by tax authorities also through the lens of the date of their preparation.

At the operational level, time records for employees engaged in the conduct of R&D projects are of critical importance. The form of such records is not strictly prescribed by legislation, but they should enable the unambiguous attribution of individual employees’ working time to specific projects and the distinction of R&D work from other professional duties. Monthly time-keeping summaries, signed by employees and their supervisors, represent a standard form of such records accepted by tax authorities. It is recommended that records be maintained at a minimum on a weekly basis, which allows for a precise demonstration of the proportion of time devoted to R&D activity.

Segregated Accounting Records for Qualifying Costs

Article 9(1b) of the CIT Act imposes on taxpayers availing of the R&D relief an obligation to maintain separately identified accounting records for research and development costs. This identification must be made within the current bookkeeping records, not merely in extra-accounting summaries prepared for the purposes of the tax settlement. In practice, this necessitates adapting the chart of accounts to the requirements of R&D cost identification, which typically involves creating dedicated analytical accounts for individual projects or categories of qualifying costs.

The records must permit verification of the correctness of the deduction by tax authorities through a direct connection between items in the tax return and entries in the accounting books and source documents. Failure to observe the obligation of accounting segregation results in the loss of the right to the relief, as confirmed repeatedly by the jurisprudence of administrative courts. The implementation of appropriate accounting procedures should therefore represent one of the first steps in preparing to take advantage of the relief.

Individual Tax Ruling as a Risk Management Tool

Given the significant tax risk associated with classifying activity as research and development, taxpayers considering the R&D relief for the first time or in connection with new categories of activity should consider applying for the issuance of an individual tax ruling under Article 14b of the Tax Ordinance Act. An individual tax ruling provides the taxpayer with legal protection, eliminating the risk of a tax arrears and interest assessment where tax proceedings subsequently reveal that the position adopted was incorrect.

An application for a ruling should contain a precise description of the existing state of affairs or the anticipated future event, encompassing a detailed characterisation of the R&D activity conducted, the structure of costs incurred and the manner of their identification within the accounting records. The quality and completeness of the description has a direct bearing on the scope of protection afforded by the ruling – a ruling protects only in respect of the factual circumstances described in the application. For this reason, the assistance of a tax adviser experienced in obtaining rulings on R&D relief matters is strongly advisable when preparing an application.

Filing the R&D Relief in Practice – Tax Return and Form CIT/BR

The deduction of qualifying costs under the R&D relief is effected at the stage of the annual tax return. For CIT taxpayers, the deduction is declared in the CIT/BR attachment to the CIT-8 return, which constitutes a detailed specification of the types and values of qualifying costs being deducted. The CIT/BR form requires information on the number of employees conducting R&D activities, the value of their remuneration constituting a qualifying cost, the values of other qualifying cost categories, and the total deduction amount.

An important principle is that the taxpayer makes the deduction within the limits of income earned – the relief cannot give rise to a tax loss. Where annual income is lower than the sum of qualifying costs eligible for deduction, the surplus is carried forward in accordance with the six-year carry-forward rule. During the tax year, the taxpayer has the possibility of taking the anticipated R&D deduction into account when calculating advance income tax payments, which can lead to a significant improvement in cash flow for entities investing intensively in research and development activity.

Particular attention should be paid to the possibility of a cash refund for taxpayers commencing their activities – so-called start-ups. The legislation provides for the right to obtain a cash refund of unused R&D relief by taxpayers in the first and second tax years of their operations, which constitutes significant financial support for young enterprises in the phase of intensive R&D expenditure preceding the generation of sales revenue.

R&D Relief and IP Box – Synergistic Application of Tax Preferences

A particularly effective tax strategy available to entities generating income from qualifying intellectual property rights is the joint application of the R&D relief and the IP Box preference, provided for in Article 24d of the CIT Act. The IP Box preference enables the taxation of income from qualifying IP – such as patents, copyrights to computer programs, utility models, and plant variety rights – at a preferential tax rate of five percent of the tax base.

The mechanism for the joint application of both preferences operates as follows: the taxpayer first deducts qualifying costs under the R&D relief from general income, and then applies the five percent rate to IP income calculated using the nexus ratio. This approach has been confirmed in individual tax rulings issued by the Director of the National Tax Information Service, who has on numerous occasions confirmed the permissibility of simultaneously applying both preferences, provided no double deduction of the same costs occurs.

The correct implementation of both preferences requires careful design of the transfer pricing policy in the case of capital groups, and the implementation of precise accounting records enabling the segregation of revenues, costs and assets associated with individual qualifying IP. Practical experience demonstrates that the combined effective tax rate on innovation income may, under this model, be reduced to a few percent, which makes Poland an attractive location for entities in the technology and pharmaceutical sectors.

Perspective of Foreign Investors – Specific Aspects of Relief Application

Foreign investors conducting research and development activities in Poland through Polish capital companies may fully avail of the R&D relief on the same terms as domestic entities, provided the Polish company is a CIT taxpayer and carries out qualifying R&D activity at its own economic risk. An important caveat applies where a Polish company provides R&D services to its parent company or another related foreign entity – in such a case, the assessment of the right to the relief requires analysis of whether the economic risk of the work conducted actually rests with the Polish entity.

In the practice of multinational groups, this issue is closely connected with the transfer pricing policy. Where a Polish company conducts R&D activity as a contract research performer, with the economic risk and economic ownership of research results residing with the parent company or a central group entity, tax authorities may challenge the right of the Polish company to apply the R&D relief. The ability to take full advantage of the relief is considerably stronger where the Polish company holds the status of a fully-fledged R&D principal that conducts research at its own risk and holds the rights to the results of that work.

Attention should also be drawn to the regulations on tax documentation in controlled transactions. The costs of R&D services provided by a Polish company to related entities must be priced in accordance with the arm’s length principle, and transactions exceeding the statutory thresholds require the preparation of local transfer pricing documentation. Combining the R&D relief with a strategy based on the IP Box preference and the transfer of qualifying IP within a group requires an integrated legal and tax approach and careful planning of both transaction structure and the remuneration policy.

Conclusions and Practical Recommendations

The R&D tax relief remains one of the most significant tax preferences available under Polish tax law, offering genuine tax savings to entities actively investing in innovation. Its effective and secure application requires the fulfilment of a range of substantive and formal requirements, and the neglect of any one of them may result in the right to deduction being challenged and the necessity of paying outstanding tax together with interest.

The fundamental prerequisite is the correct identification and documentation of research and development activity conducted by the taxpayer, which requires an in-depth understanding of the statutory classification criteria and the established interpretive line adopted by tax authorities and administrative courts. Equally important is the correct segregation of qualifying costs within the accounting records and the ongoing maintenance of time records for employees engaged in R&D activity.

From a strategic perspective, taxpayers should consider a comprehensive approach to intellectual property management, encompassing not only the R&D relief but also the IP Box preference, patent protection and an appropriate structure for the rights to the results of R&D work. The synergistic application of available preferences, supported by careful documentation and professional tax advisory services, allows for a material reduction in the effective tax burden while fully preserving legal certainty.

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