The Director of the National Tax Information (Krajowa Informacja Skarbowa), in an individual tax ruling dated November 4, 2024 (ref. no. 0111-KDIB1-3.4010.572.2024.1.JKU), resolved an ambiguity concerning the application of the innovative employees relief. This ruling is significant for entrepreneurs employing specialists engaged in research and development (R&D) activities.
Core of the interpretative issue
The main uncertainty was whether a company utilizing the innovative employees relief could reduce Personal Income Tax (PIT) advances in their full amount, or if it should apply a proportional reduction based on the actual time the specialist dedicated to R&D activities in a given month.
This issue arose from the lack of explicit provisions in Article 18db of the Corporate Income Tax (CIT) Act, which governs the rules for applying the innovative employees relief. This article only specifies that a specialist must devote at least 50% of their total working time to R&D activities, without clarifying whether meeting this condition entitles to a full or proportional deduction.
Arguments for full deduction
The company applying for the ruling presented compelling arguments, its key point being a comparison of the innovative employees relief’s structure with the R&D relief regulated in Article 18d of the CIT Act. In the case of the R&D relief, the legislator explicitly introduced a proportionality requirement, stating that eligible costs are recognized in such a ratio as the employee’s time spent on R&D activities bears to their total working time. The absence of an analogous provision in the regulations concerning the innovative employees relief seems to indicate a conscious legislative choice, because if the legislator’s intention was to introduce proportionality also for the innovative employees relief, it would have been explicitly stated in the provisions.
The applicant also referred to a series of previous individual tax rulings that consistently confirmed the possibility of fully deducting PIT advances without applying proportionality. Among the cited rulings were, inter alia, an individual ruling from February 13, 2024, ref. no. 0111-KDIB1-3.4010.786.2023.1.AN, and an individual ruling from October 26, 2023, ref. no. 0114-KDIP2-1.4010.460.2023.4.MR1. According to the company, this consistent line of rulings by the tax authorities constitutes a significant argument for the adopted solution.
Tax authority confirms a favorable stance for entrepreneurs using the innovative employees relief
The Director of the National Tax Information fully concurred with the applicant’s position, confirming the right to reduce PIT advances in their entirety, provided the basic conditions set out in Article 18db(3) of the CIT Act are met. The authority stated that:
- the sole criterion entitling to the innovative employees relief is the specialist exceeding the 50% threshold of total working time dedicated to R&D activities;
- there is no basis for requiring a proportional reduction of advances based on the actual working time in a given month;
- upon meeting the threshold condition, the company can make a full reduction of PIT advances.
This ruling is of practical importance for entrepreneurs conducting R&D activities. It confirms that the settlement of the relief is simplified – there is no need for monthly monitoring and recalculation of the proportion of R&D employees’ working time. In turn, the full deduction of PIT advances constitutes a real financial benefit for employers.
Conditions for benefiting from the innovative employees relief
It is worth recalling that, according to Article 18db of the CIT Act, to benefit from the innovative employees relief, the following conditions, among others, must be met:
- the specialist must perform research and development activities;
- at least 50% of the specialist’s total working time must be dedicated to R&D activities;
- the R&D activities of the expert must be performed under an employment relationship, or based on a contract of mandate (umowa zlecenia) or a contract for specific work (umowa o dzieło).
The ruling by the Director of the National Tax Information of November 4, 2024, constitutes further confirmation of a taxpayer-favorable interpretation of the provisions concerning the innovative employees relief. The absence of a requirement for proportional reduction of PIT advances significantly simplifies the application of this tax preference and increases its attractiveness as a tool for supporting innovative activities.
