A tax loss incurred by a company within a tax capital group does not preclude R&D tax relief

A tax capital group (TCG) may claim research and development (R&D) tax relief even if the company that actually carries out R&D activities and incurs the related eligible costs reports a tax loss. What matters is the income earned by the TCG as a whole, as the corporate income tax (CIT) taxpayer, rather than the individual tax result of the company conducting R&D activities – as the Supreme Administrative Court has once again confirmed.

Background of the case

The case concerned a TCG comprising a parent company and subsidiaries conducting R&D activities and incurring the related eligible costs. Some of these companies reported a tax loss or income lower than the amount of eligible costs incurred in a given year. In addition, as part of joint R&D projects, the costs of work carried out by one company were sometimes incurred or financed by another company within the TCG.

The TCG intended to include the aggregate eligible costs in its annual tax return, arguing that, under Article 7a(1) of the CIT Act, the TCG’s income from a given source is the excess of the sum of the income earned by its member companies over the sum of their losses from that source. Furthermore, Article 18d(1) of the CIT Act links the limit on the R&D tax deduction to the taxpayer’s income. Since the TCG is the taxpayer, it is the TCG’s income – rather than the income earned individually by the companies conducting R&D activities – that should determine the possibility of claiming the relief.

Restrictive approach of the tax authority

In its individual tax ruling of 4 May 2022 (ref. no. 0111-KDIB1-3.4010.60.2022.2.MBD), the Director of the National Tax Information (KIS) disagreed with the TCG’s position. Although the authority acknowledged that the TCG was the CIT taxpayer, it emphasised that the individual companies within the group must still determine their own revenue, costs and tax results separately, which form the basis for calculating the income of the entire TCG.

On this basis, the tax authority concluded that the TCG could deduct eligible costs incurred by a particular company only to the extent that the deduction would have been available to that company if it had claimed the R&D tax relief separately. Therefore, if a company conducting R&D activities incurred a tax loss, the TCG could not – in the authority’s view – deduct the eligible costs attributable to that company in the given year. The tax authority also challenged the deduction of costs relating to joint projects where those costs were incurred by a company other than the one actually carrying out the R&D activities within the TCG.

Favourable court rulings

The tax authority’s position was rejected by both the Provincial Administrative Court in Warsaw (judgment of 10 March 2023, case no. III SA/Wa 1484/22) and the Supreme Administrative Court (judgment of 16 July 2026, case no. II FSK 1128/23).

In the courts’ view, although the companies forming a TCG determine their revenue, costs, taxable income or tax losses separately, they do so solely for the purpose of calculating the tax result of the entire group. This does not make them separate CIT taxpayers, nor do they independently claim the R&D tax relief.

The Supreme Administrative Court emphasised that Article 18d(1) of the CIT Act provides for the right to deduct eligible costs from the taxpayer’s tax base, and in the case under consideration, the taxpayer is the TCG. Therefore, there are no legal grounds for making the group’s right to R&D tax relief conditional on whether a particular company conducting R&D activities within the group has earned income. In the Court’s view, the tax authority had thus introduced an additional condition for claiming the relief that is not provided for in the CIT Act.

This means that even if a company conducting R&D activities reports a tax loss, the TCG as a whole may claim the deduction, provided that it has earned income from sources other than capital gains and meets the remaining statutory requirements. Furthermore, the Supreme Administrative Court also confirmed that the mere fact that the costs of R&D activities are incurred or financed by another company within the TCG does not preclude their deduction by the group – as intra-group settlements between TCG companies do not constitute a reimbursement of costs within the meaning of Article 18d(5) of the CIT Act.

Conclusions from the judgment

The case is particularly relevant for TCGs in which R&D activities are carried out by some companies, while other entities generate taxable income or finance joint R&D projects. Under such arrangements, the tax authority’s restrictive approach would make the possibility of claiming R&D tax relief dependent on the tax result of the company conducting the R&D activities. In practice, this could lead to a delay or even the loss of the possibility to use the available deduction, despite the TCG as a whole earning sufficient income.

Importantly, the judgment of 16 July 2026 discussed in this article is not an isolated ruling, as the Supreme Administrative Court had already adopted a similar position in its judgments of 7 November 2024 (case no. II FSK 179/22) and 18 June 2026 (case no. II FSK 1006/23). These successive favourable rulings therefore strengthen taxpayers’ arguments and confirm that the possibility of claiming R&D tax relief at the TCG level follows directly from the group’s status as a CIT taxpayer. Unfortunately, despite this, the tax authorities continue to defend their more restrictive approach, taking further similar disputes all the way to the Supreme Administrative Court.

Of course, it should also be remembered that claiming the above deduction still requires compliance with the statutory conditions for R&D tax relief. These include actually conducting R&D activities, properly identifying and separately recording eligible costs, and maintaining appropriate documentation confirming their connection with the R&D activities and projects carried out.

To sum up, the judgment provides further confirmation that a tax loss incurred by a company carrying out R&D activities, as well as the financing of such activities by another company within the group, should not in themselves prevent the TCG from claiming R&D tax relief. What matters is the TCG’s status as a CIT taxpayer and the income it earns that allows it to deduct the eligible costs.