Research and development relief is a tool that can bring real financial benefits to entrepreneurs who invest in innovation and development. What are the rules governing this mechanism, who can use it and what projects qualify for R&D relief? Many entrepreneurs are also wondering how to calculate this relief and what the procedures are for applying for it. Running a business is not always an easy task, especially in these difficult times. However, the R&D relief is not only about complicated calculations and formalities, it is, above all, an investment in the future of your business. So what does the R&D relief look like in practice? You will find explanations in this article!
R&D relief – what is it?
Research and development relief, also known as R&D relief, is one of the most important instruments supporting the innovative activities of companies. This relief allows you to deduct part of the expenses incurred for research and development activities from the amount of income obtained from non-agricultural business activities.. This is particularly beneficial for companies that invest in new technologies, improvements in production processes or development of new products. Currently, this also involves the possibility of including some expenses in tax-deductible costs twice
When using R&D relief, it is important to understand what expenses qualify for deduction. The most important ones include: remuneration of employees involved in R&D work, costs of materials and raw materials, consulting services, costs of research and analyses or depreciation write-offs for specific fixed assets and intangible assets used in R&D activities. However, it is worth remembering that not all expenses related to research and development activities can be deducted.
The basis for using the R&D relief is running a business and incurring expenses for research and development activities. This relief is available to both small, medium and large enterprises. Below is a list of steps that must be taken to benefit from the R&D relief:
- Identifying research and development projects in the company.
- Analyzing the expenses related to these projects.
- Preparation of appropriate documentation confirming the incurred expenses.
- Submitting appropriate tax returns.
Who can benefit from research and development relief?
This relief is available to micro, small, medium and large enterprises. Regardless of the size of the company, conducting research and development activities is crucial. For example, a software production company that invests in the development of new technologies may benefit from R&D relief and additional instruments, such as relief for the employment of innovative employees.
What projects qualify for R&D relief?
When selecting projects that qualify for R&D relief, it is crucial to understand that they must meet certain criteria. Projects must be innovative, which means they must introduce new or significantly improved products, processes or services. In addition, they must lead to increased knowledge or skills in the field of science, technology or innovation.
Projects that may benefit from the R&D relief include:
- Research projects – those that lead to new scientific or technological discoveries.
- Development projects – those that use research results to create new products, processes or services.
- Experimental projects – those that test new concepts, ideas or hypotheses in practice.
It is important to note that not all projects are eligible. Projects that do not bring any added value in terms of knowledge or innovation are usually not considered.
R&D relief for eligible costs
Calculating the R&D tax relief is not a complicated process, but it requires accuracy and understanding of the rules. The basis for calculations is the value of eligible costs incurred for research and development activities. What are eligible costs? Research and development relief includes, among others:
- remuneration of employees involved in R&D projects,
- costs of materials and fixed assets,
- costs of expertise, opinions, advice and similar services.
How much is the R&D tax relief? The regulations clearly specify the amount of relief for research and development activities. Information on this subject can also be found on the official government website:
- 200% eligible costs - when the entrepreneur has the status of a research and development center and is a micro, small or medium-sized enterprise, within the meaning of the provisions of the Act of March 6, 2018 - Entrepreneurs' Law;
- when a person has the status of a research and development center and is not a micro, small or medium-sized entrepreneur:
- 100% costs of obtaining and maintaining a patent, utility model protection rights, industrial design registration rights,
- 200% other eligible costs;
- 100% eligible costs – for other taxpayers.
The R&D relief is a relief from the tax base, not from the tax payable. This means that the relief amount is deducted from your income and not from the amount of tax payable.
If you don't know how to properly approach the issue of eligible costs and how to calculate the amount of relief contact our Open Profit accounting office, where we provide services online accounting services. We offer long-term cooperation for micro and small enterprises, including those conducting research and development activities. In our offer you will find both help in setting up a companyand full HR and payroll services regardless of the industry. In addition, we deal with, among other things, determining the tax base for expenses related to research and development work. We also know how to effectively prepare application documentation.
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R&D relief – accounting
The basic step in the process of applying for research and development relief is appropriate preparation and documentation of the project. The project must meet the criteria imposed by the relief for research and development activities. It is also necessary to precisely determine the costs related to the project, which will be the basis for calculating the relief.
An important element of the procedure is the separation of the costs of R&D activities in the accounting books. If the company keeps a tax book of revenues and expenses, it is necessary to include research and development activities in column 16. At the end of the year, these costs should be summed up.
R&D relief – examples
Research and development relief is an extremely useful tool for entrepreneurs who invest in innovation. For example, a company operating in the IT sector that creates new software may benefit from the R&D tax relief, thereby reducing the costs associated with the creative process. Another example may be a biotechnology company that conducts research on new drugs. In both cases, the R&D relief allows for a significant reduction in expenses, which translates into the company's greater competitiveness on the market. R&D relief may also have a positive impact on:
- lowering costs – thanks to the R&D relief, companies can reduce the costs associated with conducting research and development;
- supporting innovation – R&D relief encourages enterprises to invest in new technologies and solutions, which translates into the development of the economy;
- supporting start-ups – young companies, which often do not have large financial resources, can use the R&D relief to accelerate the development of their products or services.
R&D relief – CIT
How does the R&D relief work in CIT regulations? The legal basis is the Act of February 15, 1992 on corporate income tax. Article 18d of this Act contains detailed provisions regarding the definition of eligible costs, research and development activities and the amount of relief available to individual taxpayers.
FAQ:
- Is the R&D relief available for all types of activities?
The R&D relief is available to entrepreneurs conducting research and development activities. However, it is not available to all types of businesses. Detailed information on this subject can be found in tax law provisions.
- Are there any limits on the size of projects eligible for R&D relief?
There are no specific limits on the size of projects eligible for R&D relief. However, it is important that these projects are related to research and development activities.
- How can the application of the R&D relief affect the company?
Applying the R&D relief brings many benefits. These are primarily:
- reducing business costs,
- increasing the company's competitiveness on the market,
- stimulating innovative solutions,
- stimulating the creation of start-ups.
