Table of contents:
- R&D tax relief – what are the requirements for accounting for personnel costs?
- R&D tax relief – how to create documentation?
The R&D tax relief, effective since January 1, 2016, entitles taxpayers to an additional deduction from the taxable base of part of the expenses incurred for R&D activities, previously included in the cost of revenue. The R&D tax relief is intended to encourage taxpayers to invest in research and development activities. In this way, it is possible to deduct, among other things, 200% of personnel costs related to the employment of employees (on employment contracts or mandate contracts) carrying out research and development activities, which additionally constitute a cost of revenue for taxpayers. Documenting employees’ involvement in research and development work plays a significant role in taking advantage of preferences for research and development.
R&D tax relief – what are the requirements for accounting for personnel costs?
In order to benefit from the tax relief, in addition to undertaking activities that meet the definition of R&D activities, companies must determine what qualified costs are associated with these activities – usually an important part of qualified R&D costs are expenditures on salaries. In order to deduct personnel costs under the R&D tax relief, legal regulations require the taxpayer to separate the part of personnel costs incurred for the implementation of research and development activities (Article 18d of the CIT Act). This separation should be made “to the extent that the time spent on carrying out research and development activities remains within the general working time of the employee in a given month.” Tax laws do not specify how to demonstrate the actual involvement of employees in research and development activities in a given settlement period. The Director of the National Tax Information (hereinafter: Director of NTI) emphasizes that the method of separating working time is a technical issue and it is the taxpayer who should be able to prove the correctness of the adopted method of recording working time.
R&D tax relief – how to create documentation?
Recording working time may be necessary to correctly determine the amount of qualified costs for employee salaries. These costs can be deducted from the tax base only to the extent that the time spent on research and development activities remains within the general working time of the employee in a given month. Therefore, in the case where an employee performs duties not only related to research and development activities, it is appropriate to separate the part of the remuneration that is not related to the implementation of research and development activities. The legislator did not impose a single pattern of documentation on entrepreneurs. The choice of method for documenting expenses for personnel costs related to research and development activities has been left to the taxpayers. For evidential purposes, it is recommended that the record of working time devoted by employees to research and development activities be kept by the taxpayer benefiting from the relief.