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Research and development relief can deliver real savings for companies investing in innovation. Although available for several years, it still raises many questions. What is R&D relief? Who can benefit, and what does R&D accounting look like in practice? We explain!
What is R&D relief?
R&D relief is a tax preference allowing part of a company's research and development expenditure to be deducted from its tax base. You not only recognise this expenditure as tax-deductible costs on an ongoing basis but can deduct it again after year-end, further reducing taxable income. This mechanism encourages investment in innovation and new technologies.
Importantly, R&D relief applies to all taxpayers running a business, regardless of scale. IT, industrial and biotechnology companies have particularly strong prospects for significant tax benefits. However, the relief is not limited to these industries.
R&D relief reduces tax burdens while maintaining the existing level of costs. Apart from possible initial implementation costs, no additional expenditure is necessary to use it. For many businesses, the relief can stimulate faster development of new products or entry into foreign markets. It can improve liquidity and increase competitiveness, especially in industries requiring constant innovation investment.
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How much can you benefit?
In 2025, as in recent years, the rules allow deductions ranging from 100% to as much as 200% of eligible costs.
To illustrate the substantial benefits of implementing this relief, consider this example:
A limited liability company conducts R&D to develop innovative biodegradable packaging using plant-based raw materials. The project aims to create a competitive alternative to plastic packaging. It tests different material mixtures and modifies production to achieve better strength and degradability. This work involves raw material purchase costs and salaries of R&D department employees.
Revenue: PLN 1,000,000
Total costs: PLN 500,000
- Including eligible R&D costs:
- Employee salaries (200%): PLN 150,000,
- Raw materials (100%): PLN 50,000.
| Company: CIT 9% | Company: CIT 19% |
Revenue | PLN 1,000,000 | PLN 1,000,000 |
Costs | PLN 500,000 | PLN 500,000 |
Income before R&D relief | PLN 500,000 | PLN 500,000 |
CIT without relief | PLN 45,000 | PLN 95,000 |
Total R&D relief | PLN 350,000 | PLN 350,000 |
Income after R&D relief | PLN 150,000 | PLN 150,000 |
CIT with R&D relief | PLN 13,500 | PLN 28,500 |
Tax savings | PLN 31,500 | PLN 66,500 |
In our example, implementing R&D relief reduces tax by as much as PLN 30,000–60,000 annually.
What is research and development activity?
To understand the relief, it helps to know what R&D activity means. It is defined as systematic, creative activity intended to gain new knowledge and use it in practice. It includes:
- Scientific research,
- Development work.
For example, an IT company developing new algorithms may classify this as R&D, as may a machine manufacturer testing prototypes of new technical solutions.
The activity must create a new product, process or service, or improve an existing one. It must contain an innovative element, but need not involve discoveries entirely new worldwide.
Note! Routine changes or reproduction of existing solutions do not count as R&D. Documenting the innovative nature of the work is essential. Companies should also demonstrate that R&D activities are planned and systematic. Otherwise, the relief cannot be applied.
Worth knowing! Even minor production process innovations may qualify as R&D and entitle you to this preference. If unsure whether you qualify, contact us. We provide accounting and tax advisory services and are ready to answer all your questions.
Who can benefit from research and development relief?
All taxpayers running a business can use R&D relief if they invest in R&D activity. Whether you run a sole proprietorship, partnership or company, you may qualify. The condition is incurring eligible costs and documenting them appropriately in relation to research and development.
Businesses taxed under the lump-sum revenue regime cannot use the relief, as their costs do not affect income tax payable. Taking R&D relief into account may make another form of taxation more advantageous for them.
Eligible costs for R&D relief
Eligible costs are expenditure deductible under R&D relief. Most commonly, they include:
- Salaries of employees involved in R&D,
- Purchases of materials and raw materials,
- Specialist equipment expenditure,
- Expert assessments, opinions and advisory services,
- Costs of obtaining a patent or industrial design,
- Depreciation charges on certain fixed assets.
Important! All costs must also be separately identified in accounting records. Invoices, payroll lists, reports, contracts and other accounting evidence support the deduction. Documentation should confirm the link to R&D. Through our accounting services, we help ensure these records meet formal requirements.
Using R&D relief step by step
Using the relief first requires identifying research and development activity.
This first step is often the hardest for business owners. You know what your company does and which innovative projects it undertakes, but may be unsure whether tax rules also recognise these activities as innovative. Simply tell us about your business and its activities, and we will help determine whether they meet the conditions for R&D classification.
Once you know you conduct R&D, several further stages await:
- Prepare complete documentation, including reports, invoices, contracts, project descriptions and schedules;
- Identify the eligible costs associated with this area separately;
- Enter the data in accounting records, marking R&D expenditure separately;
- Calculate total eligible costs at year-end;
- Check which rate you can apply: 100% or 200%;
- Deduct the appropriate amount from the tax base in the annual return;
- Complete the PIT/BR or CIT/BR attachment.
You can count on our help and support at every stage.
Businesses making a loss or earning insufficient income in their first two years may receive a cash refund corresponding to the unused relief.
How should R&D relief be accounted for?
R&D accounting requires precision and consistency. First, costs associated with R&D must be identified separately. In the tax revenue and expense ledger, they appear in column 16. In full accounting books, a separate R&D cost record is created.
All expenditure should be clearly linked to the R&D activity, requiring detailed documentation. Recording costs as they arise and assigning them to specific projects is crucial, ensuring transparency and reliable data in case of a tax inspection. Working time records must also be kept for employees involved in R&D.
Incorrect documentation may lead the tax authority to reject the relief. Proper R&D accounting, in turn, provides security in this area.
Remember that R&D relief can be combined with other support instruments, such as prototype relief or IP Box. Together, they offer greater savings and flexibility in financial management.
However, proper documentation and understanding which costs are actually deductible and on what terms are essential. Professionals such as us, the TaxCoach accounting firm, play an important role here. We know how to reconcile legal requirements with business realities. Our team will not only calculate your relief but also answer every question, advise you and handle documentation. We support experienced businesses and those just beginning to introduce innovations. You can count on us regardless of industry or scale.
If you found this article interesting, explore our tax advisory services and read how we can help you:
Summary
Trust TaxCoach's experts: settle your taxes using available reliefs. No time to explore complex regulations? Get specialist help! TaxCoach is an accounting firm supporting businesses across many sectors since 2016. We provide comprehensive accounting, tax and advisory services. Our specialisms include R&D settlements, e-commerce and cross-border taxation. Contact us to find out more!
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