Generally speaking, Polish IP Box regime allows to benefit from 5% CIT rate on your investments in new technologies. It is a new tool that may be used by companies operating in new technologies branch in Poland. The lower rate applies on profit from IP rights. It is relatively straightforward, as far as tax regulations are concerned, but as always, to fully benefit from you would need to dive into details. Below we briefly present main aspects of Polish IP Box regime.
The new regime was introduced to the Polish law as of 2019 and was soon met with enthusiastic response from the business, especially IT branch that is consequently gaining its field in the Polish economy.
The main idea behind this new regime is that it applies to Polish taxpayers developing IP rights. If you have these so called „qualified” IP rights and monetize them through sale, license or even including its value in the price of final product, you may tax the profit from this „monetization” with 5% CIT rate (instead of regular 19% rate). This is an important ease of tax burden for new-tech businesses that mostly require a lot of investment up-front and hence paying standard CIT rate right in the beginning of life cycle of the newly developed technology may be somehow problematic.
Still, there are certain issues that need to be addressed in order to fully benefit from the IP Box.
First of all, the IP right that you wish to tax with a lower rate must have official protection issued, such as patent protection, protected pattern, medical protection right, protection right of computer program etc.
Second of the main characteristics that needs to be taken into consideration is the special coefficient that modifies the amount of profit to be taxed with a lower rate. As complicated as it may seem at first glance when you go through legal provisions, basically it comes down to this: the more the cost of the IP right is borne by the taxpayer himself, the better. Equally, the bigger the part of IP that is directly acquired from third party contractors, the lower the allowance for 5% CIT rate. Therefore, the regime promotes developing the IP right by the taxpayer himself instead of complex outsourcing. In order to correctly prove the amount of profit that may be taxed with a lower rate, detailed financial summaries must be drawn up. However, bearing in mind the potential tax benefit, these additional compliance should not be much of a dealbreaker.
To sum up, if you are looking to invest in new technologies, Poland is the place you may want to consider. And this is not only due to highly skilled work force and well developed and well inter connected market. There are also legal and tax benefits available. One of them is the IP Box regime which allows Polish taxpayers to benefit from 5% CIT rate instead of regular 19% rate, in case of profit from sale of so-called qualified IP rights.
Therefore, if you buy or set up a Polish company which will develop and sell protected IP rights, this company will pay only 5% tax. What is more, you may include the IP in the price of your product and will be allowed to benefit from the lower rate on the respective part of your income.