Research and development expenses

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A new tax relief for research and development has been in force since 2016 (popularly known as the R&D tax relief), and since 2018 it has become even more attractive. The taxpayers who intend to take advantage of this relief are obliged to separate the costs of research and development activities in the KPiR. In order for them to be able to fulfill this obligation, it was necessary to change the formula of the KPiR. As practice shows, taxpayers have problems with applying the aforementioned regulations. Check how to show R&D expenses in KPiR!

Definition of research and development activity

The term R&D is explained in Art. 5a point 38 of the PIT Act. It indicates that these activities include creative development work or scientific research that is undertaken on a systematic basis in order to increase knowledge resources as well as use knowledge resources to create new applications.

Classification of expenses incurred on research and development activities

Research and development expenses incurred by taxpayers, the so-called eligible costs, in fact, reduce taxable income twice, i.e .:

  • first, in full as tax deductible costs,
  • then in the tax return as part of the R&D relief, reducing the taxable income (within the percentage limit specified in the Act).

The eligible costs are:

  1. employee salaries and social security contributions for these receivables, in part financed by the contribution payer, if they concern employees employed to carry out research and development activities;
  2. remuneration for mandate contracts or contracts for specific work and social security contributions financed by the payer, to the extent related to research and development activities;
  3. purchase of non-fixed specialist equipment used directly in the conducted research and development activities, in particular laboratory vessels and utensils as well as measuring devices;
  4. purchase of materials and raw materials directly related to the conducted research and development activity;
  5. expertise, opinions, advisory services and equivalent services, as well as the acquisition of research results, provided or performed under a contract by a scientific unit for the needs of research and development activities;
  6. paid use of scientific and research equipment used only in research and development activities, if this use does not result from an agreement concluded with an entity related to the taxpayer within the meaning of art. 25 sec. 1 and 4;
  7. purchase of the service of using scientific and research equipment only for the purposes of research and development activities, if the purchase of the service does not result from an agreement concluded with an entity related to the taxpayer within the meaning of art. 25;
  8. costs of obtaining and maintaining a patent, protection right for a utility model, rights in registration of an industrial design, incurred for the activities listed in art. 26e paragraph. 2 point 5.

Eligible costs are also made in a given tax year, classified as tax deductible costs, depreciation write-offs on fixed assets and intangible assets used in research and development activities, with the exception of passenger cars and structures, buildings and premises being a separate property.

Eligible costs incurred as part of basic research are deductible only on the condition that the research is conducted on the basis of an agreement or agreement with a scientific unit within the meaning of the Act of 30 April 2010 on the principles of financing science. Costs are not deductible if they have been reimbursed to the taxpayer in any form or have been deducted from the tax base.

In addition, the Act provides for the lack of the right to deduct eligible costs incurred if, in the tax year, the taxpayer conducts business in a special economic zone on the basis of a permit. An exception to this rule is the situation in which the taxpayer did not include eligible costs in the calculation of tax-exempt income based on the permit.

Expenditure on research and development in the annual tax return

Deduction of costs under the R&D tax relief is made in the tax return for the tax year in which the eligible costs were incurred. Where the taxpayer has suffered a loss for the tax year or the amount of the taxpayer's income is lower than the amount of the deductions he is entitled to, in accordance with art. 26e paragraph. 8 of the PIT Act, deductions - in full or in the remaining part, respectively - are made in returns for the successive six tax years immediately after the year in which the taxpayer used or was entitled to the deduction.

Tax relief for research and development is included in the annual tax return in Annex PIT / BR.

In the annual tax return, under the R&D relief, the taxpayer may deduct from the income only a part of the expenses incurred on research and development, which may not exceed:

  • 150% - eligible costs referred to in article 1. 26e paragraph. 2-3a of the PIT Act, which apply to micro-entrepreneurs, small or medium-sized enterprises (within the meaning of the Entrepreneurs' Law Act) with the status of a research and development center,
  • 150% of the costs referred to in art. 26e paragraph. 2 points 1-4a, sec. 2a-3a, which were incurred by other taxpayers with the status of a research and development center, who are not micro, small or medium-sized entrepreneurs (within the meaning of the Entrepreneurs' Law) with the status of a research and development center, and 100% in relation to the costs for which referred to in paragraph 2, point 5, incurred by the above-mentioned taxpayers;
  • 100% - the costs referred to in art. 26e paragraph. 2-3 of the Act, in the case of other taxpayers (not listed in the above-mentioned points).

The condition for deducting research and development expenses under the R&D relief is their identification in the records kept (Article 24a (1b) of the PIT Act). Therefore, in the KPiR template, a column has been separated into which this type of expenditure should be entered. This is column 16 that was previously intended for comments.

Important! Eligible costs indicated in Art. 26e paragraph. 3a of the PIT Act, relating to taxpayers with the status of a research and development center, may be included in the amount of up to 10% of the taxpayer's revenues obtained in a given tax year from non-agricultural business activities.

Research and development expenditure - an example

The company conducts R&D works in order to create a new automation and IT system. It is not a research and development center. The system is to be expanded with attractive functions not yet known on the market. In order to develop the system, a programmer with a gross remuneration of PLN 7,000 was employed from June 2018 (remuneration payable at the end of the month in accordance with the employment contract). In addition, the necessary materials in the form of servers and disks were ordered in June. The tests were conducted by the developer on the entrepreneur's own systems. The entrepreneur is an active VAT payer.

R&D costs incurred by the entrepreneur in June 2018 are as follows:

  • programmer's salary - PLN 7,000 gross,
  • ZUS contributions from the programmer's remuneration financed by the payer - PLN 1,433.60,
  • purchase of materials - PLN 960 net,
  • depreciation write-offs from machines - PLN 100.

The costs of purchasing materials were recognized by the taxpayer on the date of purchase in column 13 Other expenses. In the same column at month-end, it captured machinery depreciation. The costs of remuneration and social security contributions financed by the workplace were recognized at the end of the month by:

  • gross remuneration - in column 12 Remuneration in cash and kind,
  • ZUS contributions on the employer's side (social, FGŚP and FP) - in column 13 Other expenses.

On the same dates, the above costs were included in column 16 of the formula of the KPiR "Costs of research and development activities referred to in Art. 26e of the Income Tax Act ”.

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Therefore, the costs of producing the prototype of the system amounted to PLN 9,493.60 in total. The taxpayer fully classified them as tax deductible costs by entering them in columns 12 and 13 of the KPiR. In addition, the taxpayer may deduct from the income under the R&D relief:

  • 100% of the amount of remuneration and social security contributions, i.e. PLN 8,433.60,
  • 100% of other R&D expenditure, i.e. PLN 1,060

Total eligible costs amount to PLN 9,493.60. If the taxpayer does not incur other expenses on research and development during 2018, then, in accordance with Appendix PIT / BR, he will be able to deduct these expenses from business income under the R&D relief already in the annual tax return for 2018. an additional taxpayer's bonus, regardless of including all R&D expenses as tax deductible costs.

Attention!

In a situation where the company, for example, would have the status of a research and development center referred to in Art. 17 of the Act of 30 May 2008 on certain forms of supporting innovative activity, she could deduct PLN 14,240.40 in the annual tax return on the PIT / BR form, i.e.
8,433.60 x 150% = PLN 12,650.40
1060 x 150% = PLN 1590

How to recognize the incurred expenses on research and development in the wCompany system?

The costs incurred related to the R&D relief in the wFirma.pl system are easily recognized by: RECORDS »BOOK OF INCOME AND EXPENDITURE» TAX BOOK OF INCOME AND EXPENDITURE »ADD ENTRY in the field BR. COSTS.