The IP Box relief (Innovation Box) is a preferential taxation of income from intellectual property (IP) rights at a rate of 5%. Introduced in Poland in 2019, this relief has become a significant support measure for companies (taxpayers) developing innovations and new technologies. It is not attractive only for entities acting as employers – it is also a substantial and often used solution for Polish IT professionals operating as sole proprietors, allowing them to tax income from intellectual property rights at a 5% PIT rate instead of the standard 19% (in the case of the so-called flat tax) or 8.5% / 12% (in the case of the so-called lump sum tax).
Let us recall that its essence lies in the possibility of applying a reduced income tax rate to income obtained from the commercialisation of so-called qualified intellectual property rights (qualified IP) that have been created, developed or improved as part of R&D activities. Importantly, IP Box is not a form of taxation selected at the beginning of the year (like lump sum or flat tax). It is a preference settled in the annual tax return. During the year, the taxpayer pays advances on a general basis, and after the year ends, calculates the income qualifying for the 5% rate and may receive a refund of overpaid tax. The key to benefiting from the relief is the creation and commercialisation of qualified IP. The list of these rights is closed, but for the IT sector, one item is the most important: copyright to a computer programme. This means that if an IT professional, within their business activity, creates source code, develops new functionalities, creates innovative algorithms or significantly improves existing software, and then derives income from it, they may potentially qualify for the relief. In the B2B model, this income is most often remuneration for the transfer of economic copyright to the client.
Taking advantage of the IP Box relief imposes a number of formal obligations on the entrepreneur. The most important and demanding requirement is keeping a separate, detailed accounting record; a standard revenue and expense ledger (KPiR) is not sufficient. The records should make it possible to:
- distinguish each qualified IP (e.g., a specific project or module);
- assign income obtained from a given IP;
- assign costs incurred in creating the given IP;
- calculate the income attributable to each IP.
To demonstrate that the work was of an R&D nature, the entrepreneur should collect technical documentation, and it is also advisable to use tools confirming the systematic nature and progress of the work (e.g., code repositories, task management systems). The contract with the client should include a clear provision regarding the transfer of economic copyrights to the software created. It is also crucial to separate the fee for the transfer of these rights.
Uncertain future of the IP Box relief for sole proprietors
Recently, work has accelerated on a somewhat forgotten draft law – no. UD116 (which Dr Joanna Prokurat wrote about in her post regarding the future of the IP Box relief. The draft itself dates from the end of 2024, but now the Ministry of Finance is turning its attention to tightening up tax regulations. The government has indicated that it would like to adopt the presented assumptions of the project by the end of September this year, then submit the draft to the Sejm, and the changes – including those in the IP Box – could come into force as early as 1 January 2026.
The Ministry of Finance has indicated that it has noticed potential – in its opinion – abuses concerning the IP Box, particularly in the case of sole proprietorships, which were allegedly using the 5% PIT rate not entirely in line with the “spirit of the regulations”. As the Ministry currently proposes:
- “It is proposed to make the possibility of using the IP Box preference conditional upon employing at least 3 natural persons not related to the taxpayer”;
- “It is proposed (…) to broaden the basis for calculating the solidarity levy to include income from the IP Box”.
The planned changes to the IP Box regulations may fundamentally alter the situation of IT professionals running sole proprietorships. The requirement to employ at least three people, as well as including IP Box income within the solidarity levy, would in practice exclude most self-employed IT specialists from being able to use this preference. What does this mean for IT professionals? Above all, the necessity to rethink their tax strategy for the coming years.
