R&D tax relief as a tax instrument supporting innovation in the energy sector

R&D tax relief

R&D tax relief allows taxpayers to reduce their income tax base by qualifying costs incurred for research and development activities (in accordance with rules established by tax legislation) — by up to 200% of those costs. The essence of this relief lies in the double recognition of qualifying costs for income tax calculation purposes: once as tax-deductible costs and again as a deduction from the tax base.

R&D activity

Research and development activity is defined for income tax purposes in fairly broad terms, covering a diverse range of activities. It is understood as creative activity encompassing scientific research or development work, carried out in a systematic manner, with the aim of increasing the knowledge base and applying that knowledge to create new uses.

The taxpayer’s status — such as their size or the industry in which they operate — is irrelevant. There are also no restrictions on the subject matter of the activity, which may include operations in the energy sector.

R&D Relief — project examples

R&D relief covers a wide spectrum of activities. These may relate, for example, to the renewable energy sector, such as developing new technologies or methods that enable more efficient use of resources. Innovative activities undertaken to maintain competitiveness may also qualify as R&D. Innovative work carried out by taxpayers within projects or assignments for clients — for example, developing tailored, individualized, and creative solutions for clients — may also potentially constitute R&D activity (subject to certain conditions).

Examples of activities that have been classified as R&D and whose qualifying expenditures have been found eligible for the relief include:

• Analyses of actual energy consumption and different types of energy in given areas;
• Development of renewable energy technologies dedicated to unused agricultural production space;
• Development work on a range of eco-energy technologies;
• Design of innovative installations using, for example, waste heat;
• Development of measurement systems, e.g. for solid particle deposition;
• Construction of intelligent systems for managing the production and consumption of renewable energy;
• Development of real-time data transmission systems supporting the optimization of energy installations and reducing energy production costs;
• Development of management and control strategies for installations based on weather condition forecasts or load profiles.

These examples are referenced, among others, in an individual tax ruling issued by the Director of the National Revenue Information Service on 6 March 2024 (ref. 0111-KDIB1-3.4010.770.2023.2.JG).

Qualifying costs

Tax legislation provides for a broad range of costs that may qualify for R&D relief. Qualifying costs may include expenditure on:

• Salaries and social security contributions (where these relate to employees, contractors, or persons engaged under specific-task contracts employed for the purpose of carrying out R&D activities);
• Acquisition of materials and raw materials, including chemical components, dyes, and semi-finished products, directly related to R&D activities;
• Acquisition of specialized equipment — not classified as fixed assets — used directly in R&D activities, in particular laboratory vessels and instruments as well as measuring devices;
• External services: expert opinions, advisory services and equivalent services, as well as the acquisition of scientific research results, provided or performed under contract by a scientific institution (primarily: universities, federations of entities within the higher education and science system; PAN scientific institutes; research institutes operating under the Act of 30 April 2010 on Research Institutes; international scientific institutes established under separate legislation and operating in Poland; the Łukasiewicz Centre operating under the Act of 21 February 2019 on the Łukasiewicz Research Network; institutes operating within the Łukasiewicz Research Network; the Polish Academy of Arts and Sciences; and other entities engaged primarily in independent and continuous scientific activity);
• Paid use or acquisition of scientific and research apparatus, including long-term use under lease agreements, or acquisition of services related to the use of such apparatus (e.g. laboratory or experimental services), provided that the output of such use is a data report for internal analysis rather than opinions, expert assessments, or advisory services as described above (does not apply to transactions with related parties);
• Costs of obtaining and maintaining a patent, a protective right for a utility model, or a registration right for an industrial design;
• Depreciation charges on fixed assets and intangible assets used in R&D activities, excluding passenger vehicles and structures, buildings, and premises that constitute separate ownership (subject to special rules for R&D centres).

Taxpayers holding the status of an R&D centre may additionally include in the relief:

• Depreciation charges on structures, buildings, and premises that constitute separate ownership and are used in R&D activities;
• Costs of expert opinions, advisory services and equivalent services, research performed under contract, technical know-how, and patents or licences for protected inventions obtained from entities other than those listed above, on arm’s length terms and used exclusively for R&D purposes.

Timing of the relief

R&D relief is claimed in the annual tax return. There is no obstacle preventing taxpayers who were unable to claim the relief in prior years from amending their previously filed income tax returns (for non-statute-barred years), thereby potentially recovering overpaid income tax.

R&D tax relief is an effective instrument for genuinely supporting research and development activity, including in the energy sector. It allows for the deduction of up to 200% of costs associated with the development of new technologies and solutions for this sector. Any creative process leading to the creation or development of innovative products and services may constitute R&D activity eligible for the relief. Tax authority practice confirms that such processes are very much present in the energy sector and that the relief is available to those operating within it.