Due to the dynamic development of the IT industry, starting an IT company in Poland has become increasingly popular. Both corporations and small enterprises from the IT sector are experiencing better financial results. There is an abundance of job offers available for programmers, software testers and system administrators. Polish law provides for numerous tax reliefs as well as preferential tax rates that can be used by representatives of the IT industry. Below we present a few of those solutions, together with some tips on how to make use of them. IT companies in Poland may count on many conveniences that are very often unavailable for industries other than the IT sector. One could mention at least special R&D relief, IP Box or Estonian CIT. We reveal the meaning of the terms and explain why these solutions make starting an IT company in Poland a highly attractive idea.
Tax relief for research and development (R&D) – what do you need to know?
One of the advantages of conducting an IT business in Poland is the possibility to benefit from tax relief for research and development (also known as ‘R&D tax relief’). This relief constitutes a special solution that aims at stimulating the development of innovation within the Polish economy. It relates to taxpayers who conduct business activities in Poland and are subject to income tax. The essence of the R&D relief is the possibility to deduct from the tax base the expenditure connected with conducting research and development activities.
What are research and development activities?
Research and development activities constitute creative activities that include scientific research or development works undertaken systematically to extend knowledge and find new ways of its practical implementation. Therefore, to conduct R&D activity, the entrepreneur does not need a specified infrastructure, highly specialized staff or many years of research.
What costs may be deducted based on research and development tax relief?
According to the Acts on income taxes, the eligible costs include, among others, employment costs of the value proportional to the time dedicated to R&D activities, or acquisition of goods and raw materials directly connected with the R&D activity.
For those interested in benefiting from R&D tax relief, our company offers professional assistance in verifying whether the conducted business activity may be classified as research and development as well as in the proper allocation of eligible costs.
IT company formation in Poland and the possibility to benefit from IP BOX tax relief
Another solution that is intended for income taxpayers conducting research and development activities is the IP Box tax relief. It enables applying a preferential 5% tax rate to the income resulting from qualified intellectual property rights created, developed or improved by a taxpayer as part of his R&D activities.
A catalogue of eligible intellectual property rights that may be covered by the IP Box is strictly specified and completed. It means that the tax relief may be applied only to those rights that are mentioned in the CIT Act.
In order to benefit from IP Box tax relief, one should first identify the owned intellectual property rights and verify whether they have been created by a taxpayer as a result of the conducted research and development activity. Secondly, one should calculate the so-called ‘qualified income from a qualified intellectual property right.’ The last step is to determine the tax base covered by the IP Box relief’s preferential rate, which constitutes a sum of all the qualified rights.
A small taxpayer in the IT industry – the advantages of conducting an IT business activity in Poland under the CIT Act
The CIT taxpayers are, as a rule, subject to a 19% tax rate. However, after fulfilling certain conditions, they may benefit from a preferential 9% tax rate. Due to many factors that determine its implementation, the reduced tax rate does not apply to all taxpayers.
The CIT Act identifies that the preferential tax rate may be available, for example, for those who have the status of small taxpayers. A small taxpayer is defined as an entity whose value of sales revenue did not exceed in the previous year the amount corresponding to the equivalent of 2 million EUR, expressed in PLN at the exchange rate being in force on the first business day of October of the previous year, rounded to 1.000,00 PLN. Therefore, to benefit from the preferential tax rate one should verify if the revenue limits have not been exceeded as well as monitor on an ongoing basis the level of annual revenues.
‘Estonian CIT’ for IT companies in Poland
An indisputable advantage of running an IT company in Poland is the availability of the lump-sum tax on the income of companies, also known as ‘Estonian CIT’. It was introduced in the Act of 28th November 2020 on amendments to the Corporate Income Tax Act and Certain Other Acts. This form of taxation significantly differs from tax settlement methods applied so far.
There are two taxation alternatives available on the basis of the introduced legislation – a lump sum on the income of companies and a special investment fund that ensures faster settlement of depreciation of fixed assets in tax costs. In the case of the first method, taxpayers do not pay monthly or quarterly advance payments for income tax. Moreover, during the period of lump-sum taxation, the tax will not occur as long as the profit is used for the company’s purposes. A tax obligation arises, as a rule, only upon profit distribution by partners or after changing the form of taxation. The special investment fund, on the other hand, enables faster settlement of depreciation of the fixed assets in tax costs.
Lump sum for IT contractors in Poland
The change of the statutory definition of freelance professions provided representatives of many new occupations with a possibility to use the lump sum on registered income form of taxation. Currently, there are more than ten tax rates within a lump sum that depend on the business industry and, in some cases, on the generated revenues. This form of taxation constitutes an interesting solution, especially for IT specialists and programmers who run IT companies in Poland and, as a rule, do not generate high costs for conducting business activities.
Nowadays, the IT sector operates on two lump-sum rates – 8.5% or 12%. In accordance with the Act on lump-sum income tax on certain income earned by individuals, the 12% rate concerns, among others, income resulting from issuing packages of computer games, system software packages as well as providing services of consulting in the field of computer equipment or software. The 12% lump sum rate is also available for testers, programmers and other representatives of the IT sector, as specified in legislation.
If an entrepreneur provides services from the IT industry which do not fall within the scope of those covered by a 12% lump sum rate, it is possible to benefit from an 8.5% tax rate. In accordance with the Act on lump-sum income tax on certain income earned by individuals, the 8.5% rate concerns revenues from service activities that have not been mentioned in the classification of other lump-sum tax rates.
‘Poland. Business Harbour’– opening of the IT industry for the Eastern Europe markets
Although IT specialists constitute one of the best-paid professional groups in Poland and their earnings are constantly growing, Poland still struggles with their shortage. In order to solve this problem, ‘Poland. Business Harbour’ program was established. Its aim, along with tax reliefs and preferential tax rates, is to encourage representatives of the IT sector to conduct business activities in Poland.
The program is open not only for freelancers but also for start-ups and large companies. Its objective is to make it easier for the citizens of Eastern Europe (including Ukraine and Belarus) to enter Poland and start a new business activity in our country. ‘Poland. Business Harbour” also covers the support in the relocation of employees and their families, legal assistance as well as visa support in the form of „business concierge” service.
With the ‘Poland. Business Harbour” program, citizens of Ukraine and Belarus who are engineers or have experience in the IT sector and want to move to Poland to find a job relevant to their qualifications, have a possibility to benefit from the simplified visa procedure. Additionally, receiving a visa marked with a notation of ‘Poland. Business Harbour” exempts one from the obligation to obtain a work permit on the territory of Poland.
What is important, ‘Poland. Business Harbour’ program protects the interests of both parties. Beneficiaries of the program receive support regarding relocation and finding new jobs, and business owners benefit from hiring qualified specialists from the IT sector.
For more details, we recommend our article concerning Polish Business Harbour Visa – what it is and how it works? We also encourage you to contact our specialists, who offer assistance at every stage – from the recruitment process to relocation of the employees and legalization of their employment.
IT companies in Poland may count on many conveniences. The Polish tax system provides several favourable solutions and tax preferences that may be highly advantageous for the IT sector. After fulfilling certain conditions, IT companies in Poland may also count on the support regarding obtaining funds for innovative projects and further development.
Are you considering opening an IT company in Poland? Do you already conduct such business activity and would like to benefit from one of the described solutions? Feel free to contact our specialists. Not only will we register a company for you but will also help and advise on choosing the best possible tax solutions.