IP Box relief in Poland – between innovation and restriction
Norbert Tulak
by Norbert Tulak
IP Box relief (the IP Box is also known as the Innovation Box or Patent Box) was introduced in 2019, and remains one of Poland’s most important tax instruments supporting innovation. It allows eligible taxpayers to apply a preferential 5% income tax rate to profits earned from qualified intellectual property (IP) rights. Its main purpose has been to encourage entrepreneurs, especially in the technology sector, to conduct research and development (R&D) activities in Poland. Both corporate income tax (CIT) and personal income tax (PIT) taxpayers may benefit from this regime, including sole proprietors and partners in partnerships. However, taxpayers using the Estonian CIT system are excluded, as they do not calculate revenues and costs under general taxation rules.
The fundamental condition for applying the IP Box is engaging in R&D activity, which must be creative, systematic and innovative, and aimed at increasing knowledge and applying it in practice. Implementing standard IT solutions or maintaining existing software does not qualify. To be recognised as R&D, the activity must involve creating new or improved products, processes, services or technologies. Qualified IP rights include, among others, patents, utility and industrial designs, topographies of integrated circuits, supplementary protection rights for pharmaceuticals, and copyrights to computer programs. Income derived from these rights may benefit from the preferential rate if they were created, developed, or improved through the taxpayer’s own R&D work.
A key mechanism of the IP Box regime is the so-called Nexus ratio, which measures the proportion of costs directly related to R&D activities to the total costs incurred in generating qualified IP. The higher the share of in-house R&D in the creation of IP, the greater the portion of income eligible for the 5% rate. In practice, the calculation of the Nexus ratio has caused significant uncertainty, particularly for sole proprietors who often have limited direct costs. The tax authorities present two opposing views: some allow rounding the coefficient to one, while others argue that if it equals zero, the taxpayer loses the right to apply the relief. In practice, social security contributions are often treated as direct costs, allowing self-employed individuals to retain access to the IP Box, though they should be informed of the potential interpretative risks.
Proper documentation is essential for applying the relief. Taxpayers must maintain a dedicated IP Box ledger separating revenues and expenses related to qualified IP and linking them to specific R&D projects. The records must identify the type of IP right, the nature of the cost, and its Nexus category. Indirect costs such as rent, utilities, banking fees, or administrative services cannot be included in the Nexus base, although they may still reduce taxable income under general rules. The obligation to keep detailed records arises directly from tax legislation, and failure to do so may result in the loss of the relief during an audit.
Importantly, the Ministry of Finance has confirmed taxpayers may combine the IP Box with R&D relief, provided the same expenses are not deducted twice. This flexibility allows for more efficient tax planning and encourages companies to expand their innovative activities by combining product development and research work.
However, significant changes to the IP Box regime are planned for 2026. According to Poland’s Ministry of Finance, only taxpayers employing at least three full-time workers or incurring monthly expenditures of at least three times the national average salary will be eligible. In practice, this will exclude self-employed IT contractors and freelancers from using the 5% rate. Moreover, PIT taxpayers benefiting from the IP Box will have to include the related income in the base for the solidarity tax, resulting in an additional 4% charge on income exceeding PLN 1 million per year.
The new rules are designed to prevent misuse, and to ensure the relief supports genuinely innovative businesses. At the same time, they pose a significant challenge for small technology firms and independent programmers who have widely benefited from the IP Box in recent years. It is advisable to review business structures and cost allocations now to prepare for these legislative changes.
Despite the tightening requirements, the IP Box remains one of the most effective fiscal incentives promoting intellectual capital and technological development in Poland, provided it is supported by real R&D substance and solid documentation.
GGI member firm NTAXCracow, PolandT: +48 531 550 268
Tax, Accounting
NTAX specialises in tax advisory and accounting services for natural and legal persons on domestic and foreign markets. The NTAX accounting team works in cooperation with tax advisors and lawyers to ensure effective internal quality control and the highest standard of services.
Norbert Tulak is a tax advisor and lawyer, continuing his studies as a doctoral student and student of the Executive MBA programme conducted by the Warsaw School of Economics. He is the author of various publications on civil and tax law in academic journals and specialist presses, including the tax section of Forbes magazine. Contact Norbert.
