The Ministry of Science and Higher Education has been working on expanding the scope of exemptions related to innovations and has recently published a draft amendment to become effective as of 1 January 2017.

Those taxpayers who already bear expenses for research and development, i.e. creative activities including scientific research or development works carried out on a systematic basis with the intent to increase the body of knowledge and use of knowledge to develop new applications, may benefit from a more advantageous tax settlement. Therefore, such entrepreneurs should become familiar with the regulations currently in effect and the planned amendments.

Each entrepreneur has been permitted to use the innovation-related exemption since 1 January 2016. The exemption provides for the possibility to additionally deduct a portion of the tax deductible expenses for R&D from the tax basis. At present, the expenses may be deducted only if the taxpayer generates taxable income. The legislator intends to introduce a cash refund for newly established enterprises starting from January 2017.

The expenses subject to such additional deduction (the “eligible costs”) include:

1) remunerations and social security contributions of employees hired to carry out the R&D activities (30%);

2) materials and raw materials directly related with the R&D activities (20% or 10%);

3) expert opinions, opinions, advisory and equivalent services, as well as acquisitions of results of scientific research provided or performed pursuant to an agreement by a research unit for the purposes of the R&D activities carried out by the entrepreneurs (20%);

4) use, against a consideration, of research and development equipment used solely in connection with the R&D activities carried out by the entrepreneurs (20% or 10%);

5) depreciation write-offs connected with items of property, plant and equipment and intangible assets used for the purposes of the R&D activities carried out by the entrepreneurs (cars and buildings excluded) (20% or 10%).

Next year, the possibility to deduct the eligible costs will be increased up to 30-50% of the costs borne.

However, one should remember that in order to benefit from such deduction the costs of the R&D activities must be identified in the books and the deduction is restricted in the following manner:

• up to the amount of income generated;
• only the taxpayers carrying out operations out of the Special Economic Zones are entitled to apply it;
• only the taxpayers who have not received reimbursement of the R&D expenses
• in another form may benefit from the exemption.