THE PROBLEM OF OBTAINING AN INTERPRETATION THAT PROVIDES PRACTICAL PROTECTION UNDER THE IP BOX SCHEME
This issue has already been discussed on our blog in an article entitled “IP BOX relief. However, the Director of the National Tax Information Service will answer questions regarding research and development activities”. For more detailed information on this matter, please refer to that article.
Nevertheless, to outline the context, it should be noted that the problem to date regarding the interpretation of the IP BOX scheme has been the Director of the National Tax Information Service’s unlawful evasion of assessing and answering the question of whether the activities of the party seeking the interpretation constitute research and development activities. Disputes with the authority on this matter, without unequivocal confirmation of this fact, resulted in a refusal to issue an interpretation.
WHAT WAS THE SOURCE OF THE PROBLEM?
The source of the problem has no basis in law, as administrative courts have repeatedly emphasised. Consequently, it appears that the National Tax Information Service (KIS), seeing the high level of interest among taxpayers in utilising the IP BOX (which is evident in the sheer volume of applications for interpretations regarding this relief flooding the KIS), has taken the principle of fiscal conservatism to heart (IT professionals eligible for the relief are among the highest-earning professional groups in Poland).
Consequently, the KIS’s reprehensible practice has likely dampened taxpayers’ enthusiasm for applying for interpretations regarding the IP BOX. The situation, however, appears to have been exacerbated by the favourable changes to the flat-rate tax rate for revenue from certain IT services resulting from the Polish Deal.
REDUCTION IN THE FLAT-RATE FOR IT-RELATED SERVICES
In accordance with the Polish Deal, which came into force on 1 January 2022, the flat-rate tax rate on recorded revenue has been reduced from 15% to 12% for, amongst other things, services related to software (PKWiU ex 62.01.1). This change has sparked considerable interest in this form of taxation, as, in addition to the reduced tax rate and significantly simplified accounting, the flat-rate scheme also offers a lower health insurance contribution burden (e.g. compared to the flat-rate tax).
It is worth noting, however, that flat-rate taxation precludes the use of the IP BOX relief.
WILL THE INTEREST OF IT PROFESSIONALS IN THE FLAT-RATE TAX CHANGE THE KIS’S APPROACH TO INTERPRETATIONS REGARDING THE IP BOX?
Unfortunately, it is very difficult to answer this question. Nevertheless, our experience in the new year suggests that such a scenario is possible. In the first IP BOX interpretation received by the Law Firm after 1 January 2022, the Director of the National Tax Information Service confirmed the client’s right to apply the IP BOX relief, whilst also addressing the question regarding research and development activities in the interpretation and presenting his own assessment of the matter (ref. 0114-KDIP2-2.4011.181.2021.2.AS/IN), which had previously been highly problematic.
A similar approach can also be observed in other individual interpretations issued after 1 January 2022, e.g. 0112-KDIL2-2.4011.947.2021.2.MW, 0111-KDWB.4011.202.2021.2.BB, 0112-KDIL2-2.4011.848.2021.2.MM.
It is difficult to assess whether these rulings stem from a specific practice in individual KIS regional offices, or whether they herald a general shift away from the KIS’s previous unfavourable practice, likely due to a decline in interest in the IP BOX and the ongoing criticism of this practice by administrative courts. We will likely find the answer to this question in the near future following an analysis of the KIS’s interpretative practice after 1 January 2022.
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I specialize in Polish tax law, particularly income taxes, as well as international tax law. My experience includes, among others. providing ongoing tax advisory services, preparing legal and tax opinions, drafting requests for individual interpretations, conducting tax reviews. I gained professional experience in Warsaw law firms.
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