Favorable costs
In its latest judgement of August 12, 2025 (ref. II FSK 1515/22) the Supreme Administrative Court once again ruled in favour of taxpayers, confirming that remuneration for vacation leave and sick leave may be included in personnel costs under the research and development (R&D) relief.
From the perspective of administrative court case law, this is not a groundbreaking verdict, as it is in line with a consistent interpretation, as the Supreme Administrative Court itself pointed out in the oral justification of its judgment
However, it is worth mentioning that in recent years, tax authorities have consistently presented a different position, arguing that such costs are not directly related to R&D activities and therefore cannot qualify for tax relief.
This issue should no longer be a subject of dispute in the future, as the position of the courts was also confirmed last year in the general tax ruling of the Minister of Finance of February 13, 2024 (No. DD8.8203.1.2021).
Unfavorable proportion
At the same time, in the discussed judgment, the Supreme Administrative Court pointed out that two issues should be kept separate:
- The possibility of including a given component of employee-related expenses in eligible costs, and
- The method of determining the proportion in which a given cost may be included in the R&D relief settlement.
In this regard, the Supreme Administrative Court indicated that it agrees with the views expressed, inter alia, in the judgment of April 9, 2024 (ref. II FSK 1104/21), which explained that the term “total working time” used in Article 18d(2)(1) of the CIT Act (and Article 26e(2)(1) of the PIT Act), should be understood as nominal working time, i.e., the amount of time an employee should work in a given settlement period, including periods of justified absence (vacation, illness).
In this part, the Supreme Administrative Court disagreed with the court of first instance (the Voivodeship Administrative Court in Wrocław), which, in favor of the taxpayer, adopted a different understanding of how to calculate the proportion. The Administrative Court ruled that the period of justified absence of an employee should not be included in the denominator when determining the proportion of the relief.
Below are examples that illustrate the essence of the dispute and show how it can actually affect the calculation of the R&D relief.
Example of calculating the R&D proportion
Let’s assume that an employee is nominally required to work 160 hours in a given month, of which 80 hours are devoted to R&D activities. In the same month, the employee took 60 hours of vacation leave.
I. Position of the Voivodeship Administrative Court in Wrocław (first instance):
Numerator (R&D time): 80 hours
Denominator (total working time): 100 hours (160 hours – 60 hours)
Result: 80%
II. Position of the Supreme Administrative Court in its judgment of August 12, 2025:
Numerator (R&D time): 80 hours
Denominator (total working time): 160 hours
Result: 50%
Clearly, the interpretation presented by the Supreme Administrative Court in its latest judgment is less favorable to taxpayers, as it lowers the proportion used in calculating the R&D relief.
In our opinion, in light of the interpretation presented by the Supreme Administrative Court, taxpayers would be well advised to take a careful approach, in line with the option presented in point II above.
If you use the R&D relief in your company, it is worth analyzing whether the interpretation presented in the August judgment of the Supreme Administrative Court affects the method of settling the relief – both in the current and historical tax years – and considering taking steps to secure the company’s tax position.
Michał Solarski
Supervisor
